On 30 October 2024, the Chancellor of the Exchequer, Rachel Reeves MP, presented the newly elected Labour government's highly anticipated first budget to Parliament. With public investment at its core, the budget increases government spending with a focus on housing, transport and research and development. Capital investment will increase by £13 billion next year, taking total departmental capital spending to £131 billion in 2025-26.
We highlight some of the key spending commitments and consider their potential implications for the construction sector.
House Building
The Government wants to see 1.5 million homes built over the course of this Parliamentary term (c. 5 years). To support this it has committed an extra £500 million to the Affordable Homes Programme. It has also announced £3 billion of additional support for SMEs and the Build to Rent sector, in the form of housing guarantee schemes to support the private housing market, as well as £47 million of funding to support the delivery of up to 28,000 homes that would otherwise be stalled due to nutrient neutrality in affected catchments (an onerous planning condition affecting sites where nutrient pollution has been identified as a problem).
These measures should be positive news for developers – with much needed capital now set to flow in helping projects get off the ground.
The Government has also allocated in excess of £1 billion to assist with social housing remediation as the consequences of the Grenfell Tower tragedy continue to reverberate throughout the sector. This financial assistance will be welcome news, although supply chain capacity remains a key factor with these remediation projects, given the number of affected buildings.
Planning
£46 million is committed to boost capacity and capability within local planning authorities, as well as an additional £5 million to deliver improvements to the planning regime for Nationally Significant Infrastructure Projects (the centralised and separate planning process for important large scale infrastructure projects).
The measures are intended to complement the Government's impending legislative reform to simplify and streamline the planning system. A better funded and more capable planning system should help to speed up start on site and facilitate increased housing and infrastructure approvals in a reformed legislative landscape. The extra investment in planning coupled with the financial support for house building certainly looks a positive backdrop for housing developers and their supply chains.
Infrastructure
The Government is to fund a new National Infrastructure and Service Transformation Authority (NISTA), tasked with driving more effective delivery of infrastructure across the country. Alongside existing assurance mechanisms, NISTA will have an enhanced role in supporting major projects, including validating business cases prior to HM Treasury funding approval. NISTA will combine the functions of the National Infrastructure Commission and the Infrastructure and Projects Authority.
There is good news for railway infrastructure projects including the TransPennine Route Upgrade between York and Manchester; East West Rail will connect Oxford, Milton Keynes, and Cambridge; and HS2 trains will run to Euston, with funding provided for tunnelling to the central London terminus, which the Government contends will catalyse private investment into the station and local area.
Comment
With the costs of business continuing to depress profit margins within the industry (this budget has of course also confirmed that NI contributions for employers are to increase from 6 April 2025, adding further to those costs) and capacity issues affecting supply chains, whether the industry can deliver the Government's ambitious growth plans for housing and infrastructure remains to be seen. However, the measures outlined in the budget do set a positive trajectory from which it will be interesting to see if the challenges affecting the industry are capable of being overcome.
