Industry reaction to the Chancellor’s Spring Statement

Industry reaction to the Chancellor’s Spring Statement

With a growing ‘cost of living crisis’ compounded by the terribe events in Ukraine, pressure was growing on Chancellor Rishi Sunak to outline measures in his Spring Statement to support businesses and UK households. Did he deliver? PBM considers some of the reactions from a number of industry organisations:

The Chancellor’s decision to slash VAT to zero percent on home energy saving measures will help boost the drive for greener and more energy efficient homes, says the Federation of Master Builders (FMB).

FMB CEO Brian Berry said: “With 29 million homes in the UK, of which many are leaky and energy inefficient, decarbonising our existing housing stock represents an important piece of the net zero puzzle. Historically, consumers have not been properly incentivised to commission green upgrades to their homes. This VAT cut will help householders insulate their home at a time when energy bills are escalating.

“It will also provide a much-needed boost to local builders operating in the retrofit market. The Government now needs to build on the VAT cut and implement a long term National Retrofit Strategy to provide business certainty.”

Brian added: “The commitment from the Chancellor to improve the UK’s skills system is encouraging, notably the push for greater numbers of employers to train up staff. This is particularly true for construction, a sector that has suffered long-term skills shortages. Smaller firms in the construction sector already conduct the bulk of the training, with 71% of all construction apprentices being trained by them. Measures should focus on providing long-term solutions that incentivise more businesses to play their part in training the next generation of tradespeople. The FMB therefore welcome the Chancellor’s commitment to enhance this system.”

He concluded: “Unfortunately, the Chancellor made no reference today to the impact of the planned end to the Red Diesel Rebate on many smaller construction firms, already suffering from rising costs. While the cut in fuel duty will support builders in their travel to and from jobs and make buying regular diesel for machinery cheaper, delaying the end of the Red Diesel Rebate would have made a much more positive impact on builders’ wallets. This is precisely the wrong time to heighten costs for building projects, with an additional need for there to be greater alignment in ensuring that green alternatives, such as bio fuels, are affordable and accessible for construction firms.”

National Federation of Builders

The NFB has welcomed the ‘long overdue’ announcement on VAT For Energy Saving Measures but says Red Diesel changes will ‘hurt’.

Chief Executive Richard Beresford said: “The NFB, along with many others in the industry, has repeatedly, over many years, called on the Treasury to remove the VAT on measures which improve energy efficiency. To us it always seemed like a ‘no-brainer’ to help incentivise the public to ‘green’ their homes and meet our country’s Net Zero ambitions and today we can finally welcome the decision the Chancellor has taken. It is long overdue but at last it is here.”

On the disappointment regarding Red Diesel, and the opportunity to postpone the changes to the construction sector’s entitlement to use it, Richard said: “As inflation is set to go above 7% this year, and the Government confirmed its intention to levy a further 1.25% of national insurance contributions on employers, the cost pressures on construction businesses are unprecedented.

“While the fuel duty cut is welcome for the country at large, the reality is that in construction, the effective rate of duty is set to rise by 47p per litre because of the removal of entitlement to use Red Diesel. The decision not to delay this will hurt businesses at the time when they most needed respite from rampant inflation.”

Energy and Utilities Alliance (EUA)

CEO Mike Foster said: “The Chancellor has clearly not heard the outcry over rocketing energy bills faced by millions. He has done nothing in the Spring Statement to help the vast majority of consumers who face bills doubling this year. His VAT cut on solar panels and heat pumps will be welcomed by those who make them and by those who can afford to fit them, but a VAT cut on energy bills would have helped everyone.

“Frankly, consumers waiting to hear good news on their energy bills will be left asking: ‘Is that it, Chancellor?’”

Logistics UK

Elizabeth de Jong, Director of Policy at Logistics UK, comments: “With average fuel prices reaching the highest level on record and rising inflation, there has been an unstainable burden on logistics businesses which operate on very narrow margins of around 1%; the Chancellor’s decision today will help to ensure operators can continue to afford supplying the nation with all the goods it needs, including food, medicine and other essential items.

“Fuel is the single biggest expense incurred by logistics operators, accounting for a third of the annual operating cost of an HGV. The cut in fuel duty of 5ppl will result in an average saving of £2,356 per year per 44-tonne truck; this move will help to strengthen the UK’s supply chain during a time of ongoing financial and operational challenges.”

Royal Institution of Chartered Surveyors (RICS)

Bradley Tully, Senior Public Affairs Officer, commented: “Our findings from the market suggest that the biggest barrier to improve the energy efficiency of homes is cost – 85% of respondents in fact. However, the road to achieving Net Zero always required the retrofitting of thousands of existing homes across this country to make them greener, and discounts for homeowners looking to support these ambitions have been a long time coming, so we’re delighted the Chancellor has finally listened to our call and taken action to cut VAT for families to retrofit their homes and drive down carbon emissions.

“Looking at the wider economic picture – including rising inflation – this poses a significant pressure for businesses, and while the business rate cut being maintained will help our highstreets, it does fall short from the widescale reform that they need to flourish.”

RICS notes that figures from 2020 show less than 5% of energy used for heating homes and buildings derives from low-carbon sources, whilst it is estimated that 70% of total 2010 building stock will still be in use in 2050.

Carl Arntzen, CEO of Worcester Bosch

“We welcome the Chancellor’s removal of VAT on heat pumps, solar panels and other energy-efficiency measures. We feel that this will support the needed transition of UK homes towards a net zero future.

“One of the main barriers for consumers looking to install greener heating technology at home is the cost, so the savings this tax relief could bring may help counteract this, whilst contributing to an increased uptake of these types of measures.

“As the more specific details start to appear following today’s initial Spring Statement, it will be interesting to see whether the 5% tax relief is for the products and materials, or, as we would hope, applies to the total cost of installation,  as around 60% of the cost of a heat pump installation is on ancillaries and labour.”

*** the response from the Builders Merchants Federation (BMF) can be found here.

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