Chancellor Rishi Sunak recently presented the Spring Statement at the House of Commons with various new reforms and measures to boost the construction industry. With the growth rate in the UK at 3.8% this year and the predicted inflation expected to be around 7.4% in 2022, there was a lot of pressure for major reforms in the Spring Statement.
The construction industry was also looking forward to the Spring Statement in the hope that it would help them deal with various issues like high inflation costs, numerous administrations, shortage of labour and climbing energy costs. While some of these issues were addressed in the Spring Statement, there has been a mixed response in the industry as many feel that the measures did not offer enough support to the industry.
Among all the reforms introduced, here are five main takeaways from the Spring Statement that could greatly benefit the construction industry:
Business Rate Exemptions for Generation of Renewable Energy
In the Autumn budget last year, the government had announced business rate exemptions for businesses using plant and machinery to generate renewable energy. This exemption was to come into effect starting in April 2023.
However, the Spring Statement announced that this measure would take effect starting from April 2022, a year earlier than previously planned. The business rate exemption will greatly help the construction industry with the decarbonisation of non-domestic buildings.
Research & Development (R&D) Tax Relief Reform
In order to boost research and development in the industry, the government announced the R&D tax relief reform. This measure allows data and cloud costs to qualify for tax relief starting from April 2023.
The R&D tax relief reform will also help to refocus support towards innovation in the industry and can be extremely helpful for companies looking to adopt and improve modern methods of construction.
Reduction in Basic Income Tax
The Spring Statement also announced that the basic income tax would drop from 20p per pound to 19p per pound starting in April 2024. This could be extremely beneficial for businesses, especially with high material costs in the industry.
This is the first time in sixteen years that there has been an income tax cut and this brings some much-needed relief to businesses all over the country.
VAT Relief for Green Housing Solutions
In order to promote the decarbonising of the housing and residential sector, chancellor Sunak also announced that they would be slashing VAT for green housing solutions. This includes solar panels, roof insulation, wind turbines and heat pumps. Currently, the VAT on such green housing solutions is 5 per cent. This measure can help homeowners save £1,000 on the cost of fitting solar panels as well as £300 on annual ongoing energy costs.
This VAT relief for green housing solutions is also a key part of the government’s push for net-zero.
Skills Development and Training
Chancellor Sunak also announced in the Spring Statement that there would be various further measures to boost skills development, training and apprenticeships in the sector. This measure can greatly benefit the construction industry that has been facing various labour shortages due to Brexit, the pandemic and an ageing workforce.
According to the latest data available, the construction industry has had the highest number of vacancies in the past 20 years with 48,000 open positions. With the right skills development and training programmes, businesses can be incentivised to bring in and train more tradespeople to tackle the labour shortage in the industry.
However, the Spring Statement said that more information on this measure would be announced in the Autumn budget.