Labour Must Choose Wisely who Completes Budget 2024 Construction Projects
A marked increase in public procurement opportunities in the Budget is welcome news for the construction sector, but NFRC calls on the government to ensure they engage in responsible procurement for these projects.
"For the government to support its ambitions, it needs to be far more circumspect in its procurement in construction," says NFRC Group CEO James Talman.
The consequences of irresponsible procurement were most recently seen with the collapse of construction company ISG. ISG held at least £1.84bn of government contracts when it collapsed. These were awarded despite well-known questions about their financial stability. ISG’s collapse has cost the construction supply chain at least £300 million. It has cost NFRC Members and put some at financial risk. The new Procurement Act 2023, which comes into effect in February 2025, is a perfect opportunity for the government to ensure it gets procurement right, especially on major projects like those announced in this budget.
"Overall, NFRC is pleased at the stronger commitment to construction projects," Talman says.
However, the government must fulfil these commitments and maintain the visibility and stability of the workload pipeline; otherwise, the investment into the skills and resources needed to deliver on big goals will not happen. NFRC calls for cross-party agreement on infrastructure policy to prevent projects stalling, changing, and failing.
NFRC eagerly awaits the ten-year infrastructure plan in next year’s multi-year spending review. Once it is up and running, NISTA (the National Infrastructure and Service Transformation Authority) must help the government get a grip on infrastructure delays and give the construction sector the confidence to make long-term investments that will bear fruit.
NFRC is concerned about the increased pressure on SMEs, who comprise a large portion of our membership and the construction sector at large, caused by the increase in National Insurance for employers. While micro businesses are somewhat insulated by the employment allowance increasing from £5,000 to £10,500, many others will feel a significant strain.
There were 4,373 insolvencies across construction in the year to July, up 40% compared to 2015. NFRC is concerned this tax hike will add more pressure before the cash flow from other budget announcements enters the market. This strain restricts businesses' ability to invest in essential measures to address the skills crisis and increase productivity.
Labour's announcement of an additional £500 million for the Affordable Homes Programme is encouraging for the construction industry. However, this funding must be accompanied by significant reforms in planning if the money is to be used effectively.
The £50 million of funding to expedite the planning process is a step in the right direction, but there must be a systemic reform of training infrastructure to ensure there are enough planners in the long-term. 300 new town planners into the public sector by 2026 is not enough when there are over 350 local authorities, many of which are battling massive bottlenecks in planning approvals. More help must be directed towards planning departments, and soon.
The government’s consultation on a five-year social housing rent settlement is positive news, but NFRC echoes calls to extend this to ten years. Effective planning and sustainable investment into social housing needs long-term commitments.
While new avenues of work in educational and domestic construction are positive news for NFRC Members, the government must engage in a concerted effort to address the skills shortage crisis. Similarly to the planning system, nothing will be built without skilled tradespeople, who are rapidly retiring and not being replaced. The additional £300 million for further education, which includes £40 million to transform the Apprenticeship Levy, is a positive start but more will be needed. NFRC hopes Skills England will meaningfully follow through on intentions to work collaboratively with STEM employers and sector bodies to increase the number of new entrants. As we await more details on Skills England, NFRC is eager to ensure the nuances of each trade are considered.
