The Charter 284 letter

Dear Chancellor

Budget 2010: Protecting the UK’s long-term competitiveness

Building magazine is the leading weekly business publication for the construction industry, a sector that contributes 8.5% of GDP. As you prepare for this year’s Budget, we are writing to make the case for maintaining investment in areas on which the UK’s economic competitiveness depends.

We recognise the need for difficult choices on spending. However, we have identified five areas where the construction industry and the government could work together with the greatest effect. These form the basis of our Charter 284 campaign, which draws its title from an independent report by economists LEK showing that every £1 spent on construction adds £2.84 to the country’s GDP. This is the third highest multiple of any sector; only rail infrastructure and healthcare offer higher returns.

The five areas were identified after extensive consultation with the industry, and the campaign has the backing of the industry’s largest trade groups, including the UK Contractors Group and the Home Builders Federation, and many of the sector’s leading companies. We urge you to consider the impact of taking – or not taking – these actions when deciding priorities for capital investment.

1 Complete the renewal of the school estate More than 2,500 secondary schools and thousands of primary schools have not yet benefited from the Building Schools for the Future (BSF) and Primary Capital programmes. Many of these schools fall well below the minimum standards of a modern education system. Research by Partnerships for Schools has shown that exam results improved by 10% in 2008 in BSF schools, compared with a national average of 2.4%.

2 Don’t let spending on transport infrastructure fall more than 10% below current levels According to research by the Construction Products Association, maintaining transport infrastructure spending at 90% of the £8bn budgeted for 2009/10 is the minimum required to prevent deterioration. A recent survey by the CBI found that 70% of senior business figures believe the UK has a poor transport infrastructure, and 85% would take this into account when making investment decisions.

3 Reduce the regulatory burden on the housing sector to encourage more development

Housebuilding is at its lowest level for 20 years. Such a low rate of supply virtually guarantees that economic recovery will be accompanied by another dysfunctional housing market. This could be tackled at very little cost by reducing the regulations that home builders must comply with, including the Lifetime Homes standard and the move to zero carbon. We believe that the regulations should be simplified, and urge the government to use the study it has commissioned from Davis Langdon into the cost of regulation as a basis for reducing the burden.

4 Give householders incentives to improve their homes’ energy efficiency The government’s recent Pay as You save initiative to help householders pay for improving the energy efficiency of their buildings is a welcome move towards reducing the carbon emissions from housing, which make up about 27% of the UK’s emissions. We would like the government to link the cost of improvements to the property rather than the occupant, and consider ways to support private sector financing for the initiative. We also encourage the development of other forms of incentivisation, including the proposed renewable heat incentive.

5 Prioritise the development of renewable and nuclear energy through incentives for private sector investment There is a danger that by 2015 the UK will be facing severe power shortages, as the current generation of power stations are due to be switched off, and those replacing them will not be built fast enough to cope with demand. In addition, the EU’s 2009 Renewable Energy Directive requires the UK to meet 15% of its energy from renewable sources by 2020, compared with 6% at present. To ensure the UK can hit this target and become more self-sufficient, will need to prioritise investment in nuclear and renewable energy projects. Although the private sector is capable of financing these projects, it is in many cases reluctant to do so as it cannot properly calculate a return on investment. We are therefore calling on the government to establish a framework of private sector incentives to take the risk out of development.

Together, these are the construction industry’s key messages ahead of the 2010 Budget. We believe that action in these areas would not only help stimulate an industry that has lost 20% of its output in the recession, but would have far reaching benefits to the wider UK as it seeks to complete its economic recovery and prepare for a prosperous future.

Yours sincerely,

Denise Chevin

Editor

Building magazine