Larkfleet Group reacts to government’s spending review

26 November 2020

Larkfleet Group reacts to government’s spending review

Following a year of uncertainty and challenge, the government has today announced a unique spending review covering the year from April 2021 – April 2022. John Anderson, CEO of Larkfleet Group, welcomes the government’s plans, but warns that the housebuilding industry will need continued support in order to not just survive, but thrive in the year ahead.

The day after Boris Johnson announced the UK’s Covid plan for Christmas, and with increasingly positive reports of vaccines on the way, Chancellor of the Exchequer, Rishi Sunak, today announced a series of pledges as part of a spending review heavily impacted by Covid-19, covering just one year – rather than the usual three.

Amongst pledges to increase defense spending by £16bn, give at least £133bn to the NHS and an additional £2.2bn to UK schools, there have also been announcements in line with the government’s plans to ‘level-up’ the UK. As part of these plans, more than £100bn will be allocated to long-term infrastructure, with the creation of a new UK infrastructure bank to be headquartered in the north of England; as well as £12m being allocated to the government’s planning reform. This comes on the back of the government’s 10-point plan to kickstart a green revolution in industry, infrastructure and housing.

Reacting to the review, John Anderson, of Larkfleet Group, welcomed investment, but warned that the housing industry will need continued support in order to meet the government’s level-up agenda and weather the coming economic storms: “The UK housing industry has been responding well since it re-opened in May, with pent-up demand from buyers leading to a big increase in activity. At Larkfleet we have resumed construction on our sites under robust policies and are committed to providing new, quality housing to the public.

“The positive response has been boosted by the government’s Help to Buy scheme and the extension of the stamp duty holiday in July, which now runs until the end of March 2021. The influence of these schemes and measures on keeping the housing industry going can’t be denied and the Treasury itself has said the move had helped ‘protect hundreds of thousands of jobs, benefitting businesses across the housing supply chain and beyond’. This has been reflected in the housing industry being permitted to continue operations during the latest lockdown.

“However, in April 2021, at the outset of the government’s planned spending pledges, the stamp duty holiday will end – and this will coincide with the scaling back of the Help to Buy scheme, as well as the scheduled end of the Coronavirus Job Retention Scheme. All of these together have the possibility to create a perfect storm of uncertainty in the industry and may see activity levels impacted. 

“Rishi Sunak has acknowledged this uncertainty, saying that the Office for Budget Responsibility’s forecasts for the impact of Coronavirus will make a ‘sobering read’. In light of this it’s important to remember the significant benefits the housing industry provides the economy. Looking at existing house sales alone, each transaction benefits the economy by around £9,559, according to a report by Knight Frank Estate Agents1. Scaling that up, for every 100,000 transactions, there is a net impact of almost £1bn – all of which supports more than 11,500 jobs in the chain of those sales, from developers to moving companies.

“On this evidence, the need for homes and a thriving housing industry in the UK is indisputable – particularly in line with the government’s Build, Build, Build agenda – but in order for this to happen, housebuilders will require renewed support in 2021. This means maintaining the momentum in planning reform which we have begun to see this year. I’m pleased to see that £12m has been allocated to this in the spending review; as it is crucial in making it easier and more viable to build new homes.

“This relates also to the government’s green agenda. For example, as part of recent announcements, the government has outlined plans to encourage the installation of heat pumps as a low carbon alternative to fossil fuel boilers. At Larkfleet, we constantly strive to deliver high levels of insulation and energy efficiency in our homes and we welcome moves to improve energy efficiency in house building. However, policies like these can increase costs and impact the viability of some developments. It is important that ambitious green targets do not inadvertently lead to a fall in housing output.

“In the wake of today’s spending review, it is clear that the next year and beyond will require resilience and adaptation. The government and housing industry must work closely and collaboratively to face the challenges that lay ahead.”

 

1 Knight Frank Report – Economic benefits of housing market activity