Budget 2021 Construction Special

The Chancellor’s investment-led recovery

UK investment and the construction industry will play a central role in the Government’s planned recovery for the economy. The Chancellor has set out a range of measures to boost UK investment including a £12 billion UK infrastructure bank, the creation of eight freeports, a super tax deduction of 130% on companies’ investment in plant & machinery over the next two years and direct investment by the Government in the UK's infrastructure.

The UK economy shrunk by 10% last year, a record fall but slightly less than had been anticipated in official forecasts. Looking ahead the vaccine roll-out has brightened the outlook for the UK economy, lifting business and consumer confidence. Nevertheless, conditions remain fragile near-term and the Budget has sought to nurture the current recovery.

The Chancellor is providing near-term support for the housing market. He has extended the temporary reduction in Stamp Duty, with a phased withdrawal over the next seven months. In addition, the Government is introducing a new mortgage guarantee scheme for those looking to buy a new-build or existing home this year with a deposit of just 5%. These measures should support market turnover and house prices.

Similarly, the Chancellor has extended the furlough and related schemes into the autumn to minimise the impact upon affected households, businesses and the wider economy.

Whilst taxes will have to rise, the Chancellor is deferring planned increases until the UK's economic recovery is firmly established.

Infrastructure

• Central government capital spending rose by 42% in 2020/21 to £100.2 billion. The increase marks a step-change as part of the Government’s strategy to Build Back Better, with government investment gradually rising further over the next five years.
• The Chancellor confirmed more detail on the new UK Infrastructure Bank in Leeds. £12 billion of equity and debt capital will finance local authority and private sector investment in ‘green’ infrastructure projects across the UK. The Bank will offer a range of financing tools including debt, hybrid products, equity and guarantees to support private infrastructure schemes. The Bank will begin operating in an interim form in late-Spring 2021.

Residential

• The Chancellor has announced the Government will introduce a new mortgage guarantee scheme in April 2021. The scheme will provide a guarantee to lenders who offer mortgages this year to people with a deposit of just 5% on homes with a value of up to £600,000.
• The temporary cut to Stamp Duty Land Tax has been extended until 30 June 2021. From 1 July 2021, the Nil Rate Band will reduce from £500,000 to £250,000 until 30 September 2021 before returning to £125,000 on 1 October 2021.

Government Support

• The Government is extending the Coronavirus Job Retention Scheme until the end of September 2021. In July, there will be an employer contribution of 10% and 20% in August and September. According to HMRC, 193,000 construction jobs were being supported by the scheme at the end of December, therefore the extension of the furlough scheme will be a lifeline to many firms in Construction.
• The fourth Self-Employment Income Support Scheme (SEISS) grant was confirmed to be worth 80% of three months’ average trading profits, paid out in a single investment and capped at £7,500 in total. The grant will cover the period February to April. Self-employed individuals must have filed a 2019-20 Self-Assessment tax return to be eligible. This means over 600,000 individuals may be newly eligible for the grant. The fifth and final SEISS grant, covering May to September, was also announced and will be determined by a turnover test. Approximately 920,000 people in the construction industry are self-employed.
• From 1 April 2021 for two years, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This will allow firms to cut their tax bill by up to 25p for every £1 they invest. Investing companies will also benefit from a 50% first-year allowance for qualifying special rate (including long life) assets.
• The Government will introduce a £7 million fund from July 2021 to help employers in England set up and expand portable apprenticeships. The Government will also provide £126 million in England for high quality work placements and training for 16-24 year olds in the 2021/22 academic year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

‘Levelling up’ the Country

• The Chancellor announced that East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England. Freeports will benefit the whole of the UK. Freeports will benefit from an enhanced 10% rate of Structures and Buildings Allowance for constructing or renovating non-residential structures and buildings within Freeport tax sites. They will also benefit from an enhanced capital allowance of 100% for companies investing in plant and machinery for use in Freeport tax sites.
• The Chancellor confirmed over £1 billion from the Towns Fund for a further 45 Town Deals across England (table below).

Glenigan customers can view all new and ongoing opportunities if part of their subscription.

Not a Glenigan customer but would like to take advantage of this new investment or other construction opportunities? Please request a free demo where we can show you more details on projects of interest to your business.

PR contact:
Rhys Gadsby (Economic Analyst)
T: 01202 786 714 │ E: rhys.gadsby@glenigan-old.thrv.uk