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Hammond's Spring Statement takes a back seat

22/03/2019

Mark Robinson, Scape Group Chief Executive discusses the impact of the Spring Statement on construction.

Amidst all the votes on Brexit last week, The Chancellor of the Exchequer presented his Spring Statement to Parliament.

Since the budget moved to autumn, the Spring Statement is no longer viewed as a ‘major fiscal event’. However, being squashed in between Prime Minister’s Question Time and a debate on Brexit, it truly was a blink and you’ve missed it moment. Hammond covered some old ground by reiterating commitments made in the Autumn Budget, but also introduced some promising policies for the construction industry.

Late payments

Carillion’s collapse brought the impact of late payment to the foreground once again, emphasising the damage that cash retentions have on our already vulnerable supply chain. Late payment culture has become ingrained in the construction industry and increases during tough economic times. But it needs to be stamped out.

As part of his Statement, Hammond announced some welcome steps to help crackdown on late payments. While we continue to wait for the outcome of the government’s ‘creating a responsible payment culture’ consultation, it is promising that new laws will be introduced requiring large companies to have an audit committee that reports on payment practices with small businesses in their annual accounts. There are currently over one million Small-Medium Enterprises (SMEs) in the construction industry whose ability to invest in skills and technology is limited by reduced working capital caused by late payments, ultimately restricting their growth.

In line with the Fair Payment Charter, the industry needs to ensure Tier 1 suppliers are paid within 14 days, Tier 2 suppliers within 19 days and Tier 3 suppliers in 23 days.

SMEs are the lifeblood of the UK economy, and we must do our utmost to protect them.

Mark Robinson
Chief Executive, Scape Group

A commitment to invest

The Chancellor took the opportunity to reiterate the government’s commitment to the Northern Powerhouse, the Borderlands Growth Deal and a National Infrastructure Strategy. Our latest research highlighted the importance of investing in areas outside of London to ensure sustained growth and prosperity throughout the UK. The Borderlands Growth Deal perfectly encapsulates this.

Following the statement, the Scottish and UK governments have announced a £345m funding package for the deal. If the funding is followed by sophisticated strategic planning, the multi-million-pound deal could mean thousands of news jobs, improved digital connectivity and subsequent investment in towns across Dumfries and Galloway, the Scottish Borders, Northumberland, Cumbria and Carlisle City.

Our future workforce

Our imminent, and still probable, departure from the EU means home-grown talent is becoming increasingly important. Hammond’s announcement that the apprenticeship levy co-investment rate will be cut from 10 per cent to five per cent to support SMEs taking on apprentices is a welcome announcement. Currently, companies with a payroll of over £3m pay towards the apprenticeship levy and can access the sum of the funding they have contributed through an online account to spend on training their apprentices. Smaller, non-levy paying companies, such as SMEs, would have had to contribute 10 per cent of the costs of training an apprentice. These costs are unsustainable for smaller businesses, with SMEs previously citing cost pressures and a lack of funding as a key deterrent in hiring apprentices.

The announcement comes at a crucial time when Sajid Javid’s Immigration White Paper revealed that the government plans to introduce a skills-based immigration system post-Brexit. Unfortunately, the new system will further restrict the UK’s access to the EU’s huge talent pool. Since the referendum, we have already seen a 14.9% drop in the number of workers from the eight Eastern European countries that joined the EU in 2004. Apprenticeships are vital to the construction industry as we prepare for our departure from the EU, and they are essential in attracting the next generation of industry professionals.

2019 is going to be a crucial year for the UK. We are continuing to navigate through Brexit and in the comings months we should gain more clarity on our future position both with Europe and the rest of the world. Later this year, the spending review will set out new spending plans for public services and will be make or break for our frontline services. Hammond’s statement probably wasn’t enough to put a spring in our step, considering everything else that is going on, but it did deliver some welcome commitments and new policies.

Written by:

Mark Robinson

Group Chief Executive
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