Rumour was infrastructure spending would be slashed, thankfully that didn’t happen but everything else looks pretty bad.
Due to the pre-briefing and expectation-shaping this autumn statement there was never going to be the surprising cataclysmic event that marked its predecessor. Thank goodness. Mr Hunt said things were going to be bad and sure enough he and the OBR did not pull its punches - it is bad with inflation forecast to average 9.1% this year.
What he did not articulate, however, is that although the economic backdrop was always going to be challenging because of Ukraine, covid and resulting inflation, it has been made so much worse by his party’s choice of selecting Liz Truss as prime minister and Kwasi Kwarteng as the chancellor before him. Due to their aberrations, as far as the global investment community are concerned, the UK is still on the fiscal naughty step.
While many statistics were mentioned, for our sector, there are three numbers which were not referenced by the chancellor or OBR but which I feel present a compelling snapshot of the challenges facing our industry.
First, the annual rate of construction output price growth was 10.1% in the 12 months to September 2022; this has slowed slightly from the record annual price growth in May 2022 (11.5%). In other words construction costs are suffering huge inflationary pressures.
Those creating the built environment have a critical impact on GDP, we employ vast swathes of people, who, when gainfully employed, boost the tax take Richard Steer, Chairman
Secondly, job vacancies in the construction industry in August to October rose by 10.4% seasonally adjusted to 49,000 from the previous three months, up by 3.6% year on year. Labour is short, hence inflationary pressure brought about by wage hikes is going to continue.
Finally, architects’ workload, a lead indicator of wider building activity, fell by 8% year to year in October, reported in the latest RIBA Future Trends survey. This measure of current workload was the third consecutive month of decline, according to the architects’ professional body. Future expectations are for further declines.
This data is important because those creating the built environment have a critical impact on gross domestic product, we employ vast swathes of people, who, when gainfully employed, boost the tax take and we are larger than car manufacturing and aerospace combined. So what happens to us affects the wider economy.
On the plus side in this statement we did not see the scrapping of energy projects, transport, health-related construction or education in any short term sense and helping with business rates is useful.
But the chancellor failed to give any sort of detail on how the UK’s home owners are going be incentivised to undertake home improvement benefits reducing energy wastage and helping contributing to a net zero carbon society. I know these are big picture aspirations but promoting green initiatives makes sense in terms of reaching sustainability targets as well as saving money on energy, there was an additional £6bn of funding mentioned for a national energy group but no detail.