The UK chancellor on Friday outlined plans to accelerate the construction of more than 100 infrastructure projects by the end of next year but experts warned that rising materials costs risked stymying the government’s ambitions.
A total of 138 road, rail and energy projects were earmarked by Kwasi Kwarteng for fast-tracked planning and funding, with the aim that the “vast majority” start construction by the end of 2023.
Despite the government’s commitment to reaching net zero emissions targets by the end of the decade, 86 of the projects targeted for delivery are roads, some of which are still in their early planning stages.
Nuclear power plants, wind farms, oil and gas were included in a long list of developments, alongside a commitment to cut red tape around planning and environmental assessments and deepen the devolution of control over the delivery of projects to local government.
Noble Francis, economics director at the Construction Products Association (CPA), welcomed the plans but warned that price inflation was the biggest obstacle to accomplishing the goals.
“Central government, major clients and local authorities will be understandably hesitant in signing off projects when they know costs are going to rise substantially,” he said.
The price of UK construction materials in July 2022 was 24.1 per cent higher than a year earlier, according to the Office for National Statistics, and 46.2 per cent higher than before the pandemic in January 2020.
The price of aggregates — which includes sand, gravel and concrete — surged 63.2 per cent in the year to July, while the cost of concrete reinforcing bars rose 37.8 per cent.
Construction companies will also be affected by the repeal of IR35 tax reforms announced on Friday — legislation introduced in 2021 to clamp down on tax avoidance by sole contractors.
The CPA’s Francis said the change would benefit the construction sector by making it easier and cheaper for specialist contractors to work with self-employed workers.
However, he added, the industry “had already spent lots of time and money on dealing with IR35 at a time when they also had to deal with materials availability and cost, rising personal indemnity insurance and reverse charge VAT”.
The chancellor also pledged to accelerate the planning process for infrastructure including rail, housing and telecoms with further details planned in coming months.
Alistair Watson, partner at law firm Taylor Wessing, welcomed the reforms and said the government was showing “a serious amount of planning swagger”.
But he warned that this was the third attempt to fix the planning system in two years. “Three times a charm is the expression and we need to get on with development,” he added.
Local government organisations welcomed the overarching commitment to boost infrastructure but warned that, without state intervention to protect budgets from being eroded by inflation, it would be hard to deliver.
James Jamieson, chair of the Local Government Association, said there was “great ambition” to increase housebuilding investment in new infrastructure, but acknowledged mounting budget pressures.
“Massive increases in costs due to spiralling inflation and national living wage rises risk undermining those ambitions, by forcing councils to cut local services to meet their legal duty to balance the books.
“Government will need to step in to ensure councils have the funding to meet these ongoing pressures.”
Kwarteng also proposed bringing forward plans to encourage pension fund investment into UK assets by loosening the charge cap protecting retirement savers from high fees.
Additional reporting by Josephine Cumbo
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