UK Autumn Budget 2024: Key Highlights for the Construction Sector

5 Minute Read

The Autumn Budget 2024, presented by the Chancellor, centres on driving economic growth through strategic investments in infrastructure and regional development.

While these measures primarily focus on large-scale national projects, the budget also introduces changes that will directly impact building contractors working on commercial, residential, and smaller-scale developments. From shifts in labour costs to sustainability incentives, contractors across the industry will face both new opportunities and challenges.

Below, we explore the key budget highlights and their implications for the construction sector, with a focus on how they may influence procurement strategies and project planning.

Key Budget Highlights for Building Contractors

1. £1.4bn for School Rebuilding

The government has allocated £1.4 billion to help rebuild over 500 schools, which represents a £550 million boost to the School Rebuilding Programme from last year. This funding presents a significant opportunity for contractors involved in public-sector projects, particularly for those focusing on education facilities and regional construction​.

2. £3.1bn for NHS Estate Upgrades

An additional £3.1 billion has been committed to capital budgets, including more than £1 billion specifically for tackling reinforced autoclaved aerated concrete (RAAC) and addressing the backlog of maintenance, repairs, and upgrades across the NHS estate. This presents a notable opportunity for contractors with expertise in healthcare construction and maintenance, as they can expect increased demand for these types of services​.

3. £3bn for SMEs and Build to Rent Sector

A £3 billion boost in housing guarantees aims to support the SME and Build to Rent sectors. This funding includes schemes aimed at easing financing barriers, which will benefit contractors in residential and multi-unit development projects. For building contractors working in the private residential sector, this offers a chance to secure financing more easily for projects and access new work within the growing Build to Rent market​.

4. £500m for Affordable Homes Programme

An additional £500 million is being allocated to the Affordable Homes Programme, expected to deliver up to 5,000 new affordable homes. This provides an excellent opportunity for building contractors to tap into government-funded residential projects, particularly those involved in affordable housing and mixed-use developments​.

5. £56m for Liverpool Central Docks

The £56 million earmarked to unlock 2,000 homes at Liverpool Central Docks signals further investment in residential development in major urban centres. Contractors specialising in urban regeneration and waterfront projects stand to benefit from this substantial funding​.

6. £25m for Energy-Efficient Homes

A £25 million investment will deliver 3,000 energy-efficient homes across the UK, all targeted for affordable tenures. This funding aligns with the growing demand for sustainable, energy-efficient buildings. Contractors focusing on green construction and sustainable building practices can capitalise on this funding, particularly in the affordable housing sector​.

7. £47m to Tackle Nutrient Neutrality Delays

The government is providing £47 million to unblock the delivery of 28,000 homes stalled due to nutrient neutrality rules. This initiative aims to speed up the construction of homes that have been delayed by environmental regulations, presenting an opportunity for contractors who specialise in compliance and working around these barriers​.

Read: 6 Supply Chain Insights Driving Profits in Procurement

Major Infrastructure Projects Move Forward

One of the Budget’s defining features is its focus on expanding and upgrading critical infrastructure. The government has committed to advancing the HS2 rail project, now ensuring tunnelling between Old Oak Common and London Euston—a critical addition for improving connectivity between London and the Midlands. Furthermore, the Trans-Pennine rail upgrade and the East-West Rail between Oxford and Cambridge are set to enhance links across the country, supporting regional economic growth. This expansion signifies new project opportunities for contractors, though it may increase competition for resources and skilled labour.

Impact on Contractors and Procurement:
For commercial construction, these projects are likely to stimulate demand, requiring contractors to scale up supply chains and workforce planning. Procurement teams must be agile to ensure timely access to essential resources, especially given that these projects span multiple regions and will likely require significant logistical coordination​. Switching to digital procurement can free up the time it takes to procure by 50%, so this should be a key strategy for all commercial builders.

Freeports and Investment Zones: A Pathway for Regional Growth

The Budget reinforces the government’s commitment to Freeports and Investment Zones, with new customs sites established within existing Freeports in Liverpool, Humber, and the Inverness and Cromarty Firth. These areas are intended to attract investment and create jobs, encouraging businesses to relocate to regions with tax advantages. Construction firms operating within these zones may benefit from lower tax rates and could access regional incentives for new projects.

What This Means for Commercial Contractors:
Investment Zones provide an excellent opportunity for contractors focused on regional development projects, as they bring potential tax relief and reduced import duties on materials. Procurement teams should be prepared to navigate the complexities of customs procedures within these zones and may need to re-evaluate supplier partnerships to optimise costs in tax-advantaged locations​.

Energy and Sustainability Initiatives

The Autumn Budget maintains the Energy Profits Levy until 2030, albeit with adjustments that place higher levies on less environmentally friendly energy projects. This continued emphasis on green practices aligns with the government’s commitment to net-zero goals, indirectly encouraging construction companies to prioritise sustainability. Commercial contractors may find new tax reliefs available for energy-efficient practices and green building certifications, which will help offset costs in adopting sustainable methods.

Implications for Procurement:
With a greater focus on sustainability, procurement teams may need to adjust their sourcing strategies to prioritise eco-friendly materials and suppliers. This could entail an initial investment in sustainable resources, but companies adhering to these practices stand to benefit from emerging government incentives tied to green building standards​.

Read: Contractors are securing ROI with procurement software

Adjustments to Business Rates and NICs

The Chancellor announced adjustments to business rates that will freeze the small business multiplier but increase rates for higher-value properties, such as prime commercial developments. Additionally, Employer National Insurance Contributions (NICs) will rise from 13.8% to 15%, increasing operational costs. For construction companies, particularly those with a significant workforce, these changes may require a reassessment of project budgets to accommodate increased labour expenses.

Financial Impact on Contractors:
The rise in NICs and business rates will likely put added pressure on project margins, especially for labour-intensive construction projects. Procurement teams may need to negotiate better terms with suppliers and carefully manage expenses to counterbalance these new overhead costs, ensuring project profitability without compromising quality​.

Looking Ahead

The Autumn Budget 2024 presents a landscape of both opportunities and challenges for commercial construction contractors. While government support for infrastructure and regional development projects opens up new markets, the increased operational costs require careful planning. Procurement and project teams will need to stay adaptive to navigate evolving regulations and to leverage tax incentives effectively.

Embracing digital procurement to stay ahead of rising costs and regulatory changes is the key strategy to cut costs and stay competitive in this evolving landscape.

Read how London builder Mount Anvil cut their procurement time in half with ProcurePro and book a demo to see it in action for yourself!