Worst fear is for spending cuts

Published:  28 June, 2010

UK: While most agree that last week's emergency budget was managed well in terms of telegraphing the worst case before-hand, which made the actual budget seem not too bad, concern is building in the construction sector over spending cuts.

Paul Lacey, national marketing manager, Hanson Building Products

"It’s still not clear how the spending cuts announced in the emergency Budget will impact on our business, but investment in public sector construction looks certain to fall. The question is, by how much? The comprehensive spending review in October should give us a better steer on the outlook for the industry and hence materials supply.

"In the meantime, we are continuing to work hard to persuade the government that investment in construction will help to speed the recovery, and at the same time provide the basis for long-term economic prosperity. We are also calling for a simpler, more consistent and faster mineral planning system based on realistic assessments of future demand.

"The new parliament includes 232 new MPs. A lot of useful contacts who had some understanding of our industry have departed. That’s why it is vital that we inform new MPs about what we do, and why. Our products are basic but essential. They have an important part to play in both the economic recovery and providing the improvements in living standards that everyone wants and deserves. And they are not about to be overtaken by modern technology."


Hans Schreuder, managing director, Rockwool UK

“We welcome plans to reduce corporation tax and provide National Insurance reductions for qualifying new businesses. We believe these measures collectively will help UK manufacturing businesses as they look to grow out of the recession.

"The average 25% reduction in non-ring fenced departmental budgets that George Osborne alluded to is significant and we will have to wait and see what the precise impact will be.  Cuts to the housing budget have already been widely anticipated and, if true, will present a significant challenge for local authorities and housing associations as they look to develop and modernise housing stocks and drive the ‘Green’ agenda.

“While all modernisation projects will be affected, we would encourage the Government, local authorities and housing associations not to automatically cut energy efficiency programmes and to continue to invest in helping businesses and homeowners 'Green' the fabric of their properties. These refurbishment projects are extremely cost effective at delivering real benefits to the environment and in helping home owners to reduce energy bills”.

“While resolving the budget deficit may be a critical priority today, cutting the UK’s carbon footprint remains tomorrow’s big challenge.”


Andy Williamson, divisional sales director, IKO

"While overall the consensus seems to be that the budget is good for business in general, I am concerned at the overall impact on the construction industry. We all have to wait to see the full details of how the various cuts in public spending will hit major construction projects, however I believe we all know that this will not be good news for our industry.

"Another concern has to be the effect it will have on consumer confidence and the knock on effect this may have on the RMI market. Pay freeze to public sector workers and the reduction of disposable income in the consumers pocket will make people think twice about any home improvements. It is a shame the government could not see its way fit to reduce VAT on home improvements as requested by our industry to encourage people to spend.

"All of that said, we are where we are and something needed to be done about the state of the UK finances. Yes, we have had a tough time of it recently but things are slowly getting better, and as long as suppliers and merchants work together and look for opportunities to help each others businesses, we will come out of things as a lot more efficient and productive industry. Opportunities exist for all of us, we just need to capitalise on them."


Ron Walker, director, Heating Plumbing Supplies

"At HPS we believe the emergency budget strikes a reasonable balance between fiscal austerity and economic recovery. Arguably local authority spending is most under threat, but much of this expenditure is already earmarked. The renewable technologies are unlikely to be affected  as the Government is already committed to expanding this growing market.

"Given the challenge the Chancellor faced, the Budget is less damaging to growth than it could have been but much will depend on the reaction of consumers in the  medium and long term. The rise in VAT next January is likely to mean that some big ticket  purchases will be brought forward to the end of 2010 at the expense of growth in early 2011."


Ian Exall, CIMCIG

"Although there were no further capital spending cuts, the Budget Statement did feel like the quiet before the storm as the chancellor announced that cuts will be made in the October Spending Review and a 25% reduction in budgets for non ring fenced or protected departments.

"A concern for the construction industry must be the increase in VAT to 20% from January. Not only will this make the cost of domestic refurbishment work that much higher it will also increase the price differential between builders who are VAT-registered and the so called 'black economy'.

"The vast majority of the smaller, non-VAT registered builders are good and honest tradesmen but any increase in cash in hand work cannot be to the advantage of the economy or consumer, particularly where the work entails warranties or other such proof of purchase. We all expected, and even wanted, a tough budget to help deal with the national deficit but we were also looking for a budget that would encourage an acceleration of carbon reduction activity.

On the same day of the Budget Statement CIMCIG published a report which identifies that the consumer needs to be fully motivated to carry out energy saving measures to their homes in order to meet the nations carbon reduction targets. This budget statement is a missed opportunity as it does not provide incentives for energy efficiency refurbishment."


Jane Campion, marketing manager, Brett Landscaping

"Householders traditionally have a priority list for discretionary spending which rarely sees landscaping at the top, or even high up, so with concerns about job security and personal incomes any growth in the domestic sector will be curtailed.

"Yet ironically, the VAT increase will probably not have a noticeable effect. The drop to 15% had little obvious effect, and there are a number of commentators suggesting the increase to 20% in a future growth environment will not have a significant impact. So, perhaps a 2.5% increase in the cost of landscaping improvements will not put people off or discourage people from deciding to embark on projects.

"Fortunately, I don’t see this as a movement towards the cowboy builder or installer who offers a small ‘cash in hand’ reduction in costs. People will still expect a high standard of work, perhaps even more so as people will want to avoid spending money on rectifying poor workmanship.

"One thing which is disappointing is the lack of response to industry lobbying. Specifically, no help is being given to the construction industry in the shape of reduction in VAT for green energy saving products or for labour of housing repair maintenance and improvement. There are good arguments for these measures and the industry will no doubt express its disappointment.

"We have been in a tough economic environment for a few years now, so a budget which aims to provide a longer term solution could be seen as a positive one, although we will not see the benefits for some time to come."

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