Winter is coming… but it won’t be a whiteout for business

Mike Andrews LLB (Hons), LLM, Chief Executive Officer, THE NAPIT Group

Mike Andrews LLB (Hons), LLM, Chief Executive Officer, THE NAPIT Group

It’s that time of year again. The time where we might all have expected to emerge, dazed and confused from the upheaval of the Chancellor’s latest financial plans.

Thankfully, however, there are more than a few positives in this year’s autumn statement and spending review to keep businesses in the building services sector warm this winter.

All in all, the outcome of these important fiscal announcements is much better than expected.

For a Government as committed as the Conservatives are to balancing the books and so ideologically opposed to all things green, the news we received on November 25th wasn’t all that bad.

There were of course some negatives though, so let’s get those out of the way first and save the best news till last.

Local authority cuts

Core central Government funding to local authorities, made up of business rates and the revenue support grant, will fall by 24 per cent in real terms over the spending review period. However, when taking into account the Office of Budget Responsibility’s forecasts including additional income raised locally by councils, the overall result is a 6.7 per cent real terms reduction.

We are disappointed by this move, which follows a 34 per cent cut between 2010 and 2015.

In a prominent report by the Electrical Safety Roundtable, sponsored by the NAPIT Trade Association, it was noted that budget constraints within local authorities were having a detrimental effect on their capacity to enforce the Building Regulations effectively.

Putting further financial obstacles in the way of already constrained building control departments is likely to have a further negative impact on enforcement of Part P, increasing the risk of electrical safety hazards going unchecked. So our efforts in this area will be increased over the forthcoming months to try to ensure the cuts won’t result in an escalation of poor enforcement.

ECO, RHI and FiTs

But now for some relatively good news.

From April 2017, the Energy Company Obligation will be replaced by a new, cheaper domestic energy efficiency supplier obligation which the Chancellor has said will run until 2022.

Though the estimated value of the new scheme is decidedly underwhelming, standing at £640 million, compared to around £1.3bn for ECO, the news does offer a valuable degree of certainty and potential stability.

This should help to renew business confidence and allow those in the energy efficiency sector to prepare accordingly.

The plans are expected to result in energy efficient upgrades for over 200,000 homes per year, which is good news for those working in building fabric.

There was also some great news for renewable heat installers. The Government will increase funding for the Renewable Heat Incentive to a headline figure of £1.15 billion by 2020-21 – though we understand that only around £690m of this will be through new installations.

Nevertheless, by the end of the next parliament, the Chancellor expects to have incentivised enough renewable installations to heat a further 500,000 homes. That’s on top of the 43,202 that have been upgraded under the programme since it started in 2011, marking a significant investment (table 1.2).

Finally, on the Feed-in Tariff, we hope that no news is good news as the Chancellor made no mention of an outcome to the controversial consultation that could see rates cut by up to 87%. But his commitment to reducing household energy bills by £30 in the short term suggests that a positive outcome may be unlikely, despite widespread industry condemnation.

House building and apprenticeships

Lastly, let’s end on two big positives.

In his speech to Parliament, Mr Osborne was pleased to announce the introduction of the “biggest affordable housing programme since the 1970s”.

This is great news for everyone working in the construction and building services sector. It marks a substantial commitment, doubling the housing budget to £2bn per year in an attempt to deliver 400,000 new affordable homes by 2020-21.

Osborne also spoke about apprenticeships. Spending in this important area is now set to increase to £2.5bn and a new levy, which will only impact the largest companies, is projected to raise a further £3bn by 2019-20 to help more young adults into hands-on trades.

Conclusion

The autumn statement and spending review, as it turns out, wasn’t the whiteout some had expected.

In a time of austerity, no one realistically expects big tax cuts or major investment in new incentive schemes. All things considered, the Chancellor’s latest economic manoeuvres actually came as a pleasant surprise.

So, with some good news to sustain us and the fastest growing economy in the G7, there’s certainly cause for good cheer this festive season.

Merry Christmas and a prosperous new year.


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