The UK Autumn 2024 budget has introduced a range of economic measures intended to guide the country’s fiscal policy and public investment priorities over the coming years. The budget outlines changes in taxes, wages, and spending in key sectors, with an emphasis on infrastructure, affordable housing, and sustainability. For the construction industry, the budget presents important implications. Below we explore the potential benefits and challenges the 2024 budget poses to the construction sector, breaking down the main points of interest.

Pros

Infrastructure Investment

The 2024 budget allocates an additional £50 billion toward infrastructure projects. Local road maintenance funds have also been increased by 50%, which is likely to boost job creation and increase demand for construction services across different regions.

 

Affordable Housing Initiatives

To address the ongoing housing shortage, the budget includes new funding aimed at affordable housing. This investment could enable more construction companies to engage in residential projects, helping to increase the supply of affordable housing across the UK. By prioritising housing development, the government aims to reduce housing costs for the public and support the construction sector with steady work in residential building​.

 

Environmental and Green Projects

In line with the UK’s environmental goals, the budget introduces funding for green initiatives, such as carbon capture and developments at the Sizewell C nuclear plant. These projects align with efforts to reduce the nation’s carbon footprint and create opportunities for companies engaged in sustainable construction practices.

Challenges

 

Increased Employer Costs

Among the budget’s workforce-related changes, the employer National Insurance contribution rate will increase from 13.8% to 15%, along with a rise in the national minimum wage to £12.21 per hour. For construction companies, especially SMEs, these changes will raise operating costs. This shift may place pressure on companies to adapt their staffing levels or seek greater cost efficiency in other areas to manage these increased expenses​.

 

Corporate and Capital Gains Tax Adjustments

The budget also introduces higher corporate tax and capital gains tax rates, which could impact construction firms’ reinvestment decisions and succession planning. Higher taxes on profits and gains may affect companies planning expansions, as well as those looking to undergo ownership transitions. For firms balancing these costs with day-to-day operational expenses, the tax adjustments could limit available funds for future projects​.

 

Limitations on Equipment Expensing

Although many construction firms lease equipment for projects, the budget does not extend full-expensing tax breaks for equipment hire, which could discourage companies from investing in modern machinery. Without these breaks, firms may face difficulties financing upgrades, potentially impacting the efficiency and timelines of projects that require up-to-date equipment​.

 

The Autumn 2024 budget holds mixed implications for the construction industry, with significant investments in infrastructure and housing creating potential opportunities, while increases in labour costs and taxes present financial challenges. Construction companies may need to consider adapting their strategies to manage the changes introduced in this budget, balancing growth potential with careful cost management as they navigate a shifting economic landscape.