The outbreak of the Coronavirus has caused a level of uncertainty not seen since, well Brexit! It is therefore inevitable that investment in capital projects within the private sector will again be delayed until the impact of COVID-19 can be fully assessed. But the recent backing of HS2 had at least shown that the government remained keen on investing in large infrastructure projects, alluding to a reliance on this sector to kickstart the economy. A big infrastructure package had therefore been widely anticipated and Mr Sunak didn’t disappoint!
Straight off the bat, the Chancellor had promised to turn on the spending taps and committed more than £600bn to be spent on infrastructure over the next five years – the highest level of investment since 1955. £27bn earmarked for roads, £1.5bn for further education colleges to upgrade their buildings and a further £1bn set aside to replace unsafe cladding on high rise buildings. How much of this will trickle down to small and medium sized businesses is yet to be seen but, it is likely that resources in the sector will continue to be strained.
The Bank of England’s decision to slash interest rates on Budget day to 0.25% may have been an emergency measure in response to the Coronavirus, but the sector should benefit from the buoyancy this creates. Cheaper borrowings should incentivise those capital projects that might have otherwise been put on hold and ensure that demand for housing stock remains high, especially given the government’s commitment to deliver 1 million new homes by the end of the Parliament.
Unfortunately, there was no further mention of IR35 and the Domestic Reverse Charge for Building and Construction Services with the Budget confirming that both will come into effect as previously announced from April 2020 and October 2020 respectively.
A former Chancellor made a point about fixing the roof while the sun was shining. It is difficult to promote a sunny outlook at present but without these urgent repairs, the proverbial roof might otherwise be at risk of caving in!