By Steve Mulholland, CEO, Construction Plant-hire Association (CPA)
Faced with anaemic growth, Labour’s Budget needed to give businesses the confidence to deliver a real boost – and in construction, that is ultimately judged by whether it is now easier or harder for Britain to build. Much of the strain facing the sector stems from decisions taken in the last Budget, which introduced damaging tax reforms at the very moment construction needed certainty. This was Labour’s chance to put that right – yet instead it leaves the firms keeping the country moving shouldering even more of the burden. By failing to reverse the inheritance tax changes and maintaining a punishing cost base, this Budget makes it harder – not easier – for the family-run firms vital to construction to build.
Family-run firms make up 96% of the construction sector. It is a capital-intensive industry, meaning many businesses are asset-rich but cash-poor. In plant-hire especially – the sector the Construction Plant-hire Association represents – firms hold a whole host of machinery and equipment including small tools, excavators, temporary power and cranes on their balance sheets required to build the infrastructure and buildings essential to society: essential kit, but not cash reserves.
That is precisely why Business Property Relief (BPR) has been so important. It prevents families being forced to break up or sell off parts of their business simply to meet an inheritance tax bill. Last year’s decision to weaken BPR has already caused serious damage, and Labour’s refusal to reverse those changes in this Budget compounds that error.
Our latest member survey illustrates the scale of the problem.
80% fear BPR changes put passing their business to the next generation at risk, while 76% say investment in new equipment will fall and 66% expect cuts to staff and apprenticeships.
For a sector worth £14 billion to the UK economy and supporting 191,000 jobs, this is not a marginal issue – it is a critical risk. You cannot deliver 1.5 million homes or a modernised national infrastructure while undermining the businesses that supply 85% of the country’s construction machinery.
This Budget’s decision to maintain the recent National Insurance increase is another blow to construction. The previous Budget set these rises in motion, and today’s failure to row back means those costs are now locked in at the worst possible moment.
Our sector is grappling with a perfect storm: a shrinking workforce, a rising average age, and persistent skills shortages. This pressure comes at the precise moment we need around 250,000 additional workers a year just to meet the infrastructure pipeline, on top of the 161,000 required to deliver 1.5 million new homes.
If Labour is serious about turning its infrastructure ambitions into reality, it must stop piling additional costs on the employers who train and retain the workforce. By choosing not to reverse the National Insurance hike introduced last time, Government risks stalling projects, weakening capacity and placing Britain’s build ambitions on a precipice.
While funding SME apprenticeships for under-25s is welcome, it does not come close to the scale of the challenge. Construction employs around 10 per cent of the UK workforce yet accounts for 15 per cent of all insolvencies, with unemployment having risen by 282,000 over the past year. Family-run firms cannot hire at the pace Britain needs when their cost base is already being squeezed by last year’s Business Property Relief changes and rising employer taxes.
Plant-hire firms now need certainty that investment in new, greener equipment will be matched by fair tax treatment. Measures such as full expensing for leased plant – something the CPA has consistently called for – would send a powerful signal that Government understands how modern construction works.
The introduction of a 40 per cent first-year allowance is a small but important win for our sector. It gives firms the ability to claim a significant portion of tax relief upfront when buying new equipment, improving cash flow at the point of investment.
The CPA has been calling for measures that support reinvestment, and while this doesn’t solve the wider challenges facing the industry, it is a small step in the right direction, along with the amendments to date of the Employment Rights Bill which we shall continue to engage on.
Whilst, this Budget recognises the importance of construction in theory, yet too many of its decisions work against the businesses expected to turn political ambition into reality. Two consecutive Budgets have now asked family firms who supply the vast majority of equipment, materials and people to absorb higher taxes, higher employment costs and higher uncertainty – without offering the stability needed to invest.
Family-run construction firms are ready to play their part, but they need a tax and training system that works with them, not against them. Unless that changes, Britain’s infrastructure ambitions will continue to outpace the capacity needed to deliver them.
What’s needed now is a reset: a genuine partnership between Government and industries supply chain. The sector stands ready to invest, but cannot do so while battling a tax system that punishes succession, rising employment costs and a shrinking skills pipeline.
If ministers want homes built and infrastructure delivered, they must work in lockstep with the businesses doing the heavy lifting. For every £1 spent with the plant-hire sector, the wider economy sees £3 returned – the gains from getting this right are enormous. Give the sector fair tax treatment, long-term certainty and a modern training framework, and it will deliver. Without that, Britain’s build ambitions will remain just that: ambitions.
