Shares in the housebuilders Barrattand Berkeley rose sharply after the chancellor confirmed that an additional £150m would be invested in the construction of 1,500 new homes as the government put infrastructure and housebuilding at the centre of plans to stimulate economic growth.
The increase raised concerns that the government had overestimated the number of homes that would be built. The government will now spend £570m under the Get Britain Building scheme, up from £420m announced in the Autumn statement.
“They are providing more money but not actually more homes,” said Noble Francis, economist at Construction Products Association. “It makes you wonder whether the government got its estimates wrong.”
Get Britain Building provides money for construction firms, with the aim of restarting projects that were stalled due to finance issues but would otherwise have gone ahead. But Mr Francis said that most of the homes would be seen in 2013-14 onwards when economic forecasts suggest that these projects would have gone ahead anyway.
Despite the government’s emphasis on infrastructure, there were few specific measures to boost construction. Although corporation tax is set to fall, UK companies investing in buildings and structures continue to face much higher effective tax rates, because of the abolition of the industrial buildings allowance in 2008. Richard Threlfall, partner at KPMG, said the UK remains out of line with other G20 countries because of the absence of this relief.
Other projects that could boost the construction industry include the £2bn in additional private finance for new capacity on roads, although nowhere near the £20bn government initially envisaged in the Autumn statement. The chancellor said he was talking to “a dozen pension funds” to bring in private finance but gave no further details.
An additional £100m for armed forces accommodation, and a £130m boost for rail electrification schemes will also benefit construction companies. The credit easing, previously announced, which will help banks to borrow, and lending at lower rates could also help smaller companies, assuming the banks are willing to substantially improve lending.
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