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  • March 8, 2017

Arcadis Budget Response 2017

Chancellor Philip Hammond has today unveiled his first full Spring Budget statement, calling for a “stronger, fairer, better Britain”.

"Today’s announcement was a function of the geopolitical ‘tight rope’ Britain is about to walk”

Commenting on the announcement, Will Waller, Market Intelligence Lead at Arcadis, said: 

“Today’s budget was a function of the geopolitical ‘tight rope’ that Britain is about to walk for the next two years at least.  Buoyed by the UK’s short term economic outperformance, the Chancellor’s budget has set a self-assured and positive tone for the future, whilst at the same time making staid plans for the turbulence that many believe the UK will encounter.  

“But this budget was about more than just preparing for the upcoming negotiations – it played into building a positive vision for the globally competitive Britain, focussed on improving productivity and quality of life.  Investment in education and skills, consumer protection, PhD research, robotics and tech, devolved administrations, congestion and working families are all clearly aimed at making the UK a better and more competitive place to be for the longer term.  Lower forecast public borrowing, an intensified clampdown on tax evasion, previously planned reductions to corporate tax rates and robust economic growth forecasts will naturally underpin this.  The construction industry will inevitably be a beneficiary of a number of these initiatives.

“However, the biggest losers today are the self-employed.  The quid pro quo has come predominantly in the form of national insurance rises and loss of tax relief on dividend payments, which will leave the self-employed worst off.  For an industry like construction where 40% of the workforce are self-employed (15% across the whole economy), this could be disproportionately felt and comes at a time when other measures, such as April’s changes to the IR35 regulations governing some self-employed workers, could have significant impacts on labour market dynamics in the construction industry.

“Many are calling this budget a ‘damp squib’ and no doubt there will be disappointment in certain quarters, but could it actually have been a more subtle overall proclamation? The UK has taken stock and is poised and ready to positively face imminent challenges on the global stage.”


“Disappointing that Government isn’t moving with more purpose to address the crisis”

Mark Cleverly, Head of Commercial Development at Arcadis, said: 

“Today’s budget illustrates the dilemma facing this Government - on the one hand, investment is needed to secure the prosperity of the UK outside the EU, yet on the other, the Chancellor simply dare not lose control of long term borrowing given the size of the current deficit. 

“It is disappointing not to see the Government moving with more purpose in addressing the housing crisis. The creation of a National Housing Delivery Authority that could work in a co-ordinated way with the devolved regional governments and combined authorities to accelerate housing delivery could be the best economic lifeline we have to boost output and GDP in a post-Brexit world. 

“The UK has one of the best infrastructure investment programmes in the world. In the same way, greater co-ordination of the huge latent demand in the housing sector would attract the funding to deliver the housing of all tenures that the Government’s purse simply cannot meet. The money is out there if we can create investable programmes.  

“Greater planning and co-ordination around the housing agenda with increased partnership working between the public and private sectors offers the UK the best chance of a soft landing from Brexit. However, more co-ordination and purpose is needed around land assembly, planning and funding and also opening our doors to skilled workers from outside the EU to meet the industry’s chronic capacity constraints.”


“£500m investment in new T-Levels could require £4bn of extra capital”

James Bryce, Director of Workforce Planning at Arcadis, said: 

“The UK is facing a skills gulf like never before, and training and productivity need to be at the forefront of policy. A shortage of labour means rising costs for business, and much needed homes and transport networks being delayed. Construction employment is already down 15 percent on 2008 and if we don’t have enough people to build the homes and infrastructure we need, the UK is going to struggle to maintain its competitive position in the global economy. 

“An education model more weighted towards technical training – and with more straightforward routes into technical employment – will do much to ease the problem. Government and industry need to support people at all stages of their career as they develop both their technical excellence and employability, and concrete measures like this are going to be vital for addressing issues of national house building capacity and infrastructure productivity.”

Marcus Fagent, Head of Education at Arcadis, added: 

“The Budget announcement of an additional £500m pa funding for the new ‘T levels’ represents an essential investment in developing technical skills in the UK. The aim is to grow the number of teaching hours received by the 600,000 post-16 students currently on technical courses by 50%. However, this will require significant capital investment on top of the additional £500m revenue investment.  

“Having had access to very limited capital funding over the last four years, FE Colleges have been through a phase of rationalising their estates, amalgamating and reducing any unused space to maximise their operational efficiency. They now have limited spare space in which to expand.  Schools have received no funding for space other than that needed to deliver the academic curriculum in recent years, as capital spending has been driven down by efficient space models and standardised design and specification.  By comparison in the Netherlands, where there is a better technical training provision, every Secondary school is built with an additional 650m2 of non-academic training space; an investment of more than £1.5m per school.  

“The Government FE College Investment Strategy estimates that £1m of capital investment could create facilities for 75 new learners. On this basis, it would cost an additional £4bn to increase the number of Post 16 students on technical courses by 50%; a very similar figure to that needed to emulate the Dutch provision in schools.  Creative minds will find solutions that reduce these costs but we estimate that the Government may need to inject £500m of capital investment every year to match the planned revenue investment to make T-Levels deliverable.”

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