UK housebuilding slump eases; City braces for Hunt’s budget – business live

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Jeremy Hunt has headed to the Commons ready for the budget statement at 12.30pm, once Prime Minister’s Questions is over:

Resolution Foundation’s Torsten Bell predicts there will be a “massive row” if national insurance rates (paid by workers but not pensioners) are cut, but income tax (paid by both groups) are not….

The Times’s Steven Swinford has a breakdown of the measures expected in the budget today….

Vox Populi, Vox Dei and all that:

Paula Bejarano Carbo, economist at research institute the National Institute of Economic and Social Research, points out that UK living standards are lower than before the Covid-19 pandemic hit:

“Today’s Spring Budget is taking place against a backdrop of low economic growth, as seen most notably by GDP per head being lower in the last quarter of 2023 than just before the pandemic (2019 Q4).

While increasing real wages have improved conditions for many households in recent months, long-term economic prospects will remain weak without growth-enhancing fiscal policies, such as a commitment to increasing public investment. We therefore hope today’s Budget focuses on the long-term, rather than pre-election giveaways.”

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The City will be eager to see the latest economic forecasts from the Office for Budget Responsibility today, says Lindsay James, investment strategist at Quilter Investors.

James also doesn’t believe the budget will have much impact on the opinion polls (where the Conservatives are trailing):

“Ahead of today’s Spring Budget, it has been widely reported that a 2p cut in National Insurance is due to be announced at a cost of £10 billion, with cuts to income tax likely to be unaffordable. This would limit the scope of any further cuts given the estimated £13bn of headroom the Chancellor has to play with.

“While this cut would be welcome news to hard-pressed taxpayers, in the context of frozen tax thresholds and other planned tax rises in the years ahead in areas such as stamp duty land tax, the tax burden is still on track to exceed all-time highs. Meanwhile, public services continue to be a source of frustration for much of the electorate.

“A key area of focus today will be the updated OBR forecasts, particularly in light of the recent falls in both inflation and growth. With spending headroom having been created largely due to falling interest rates over the forecast period, this may be an early sign of light at the end of the tunnel. Whether this can come in time to limit electoral damage for the Conservatives remains to be seen, but with talk of a May election date, today’s budget seems unlikely to have much impact on existing polls even if, for now at least, there is a small benefit for our wallets.”

Confidence among UK builders has picked up, reports Max Jones, director in Lloyds Bank’s infrastructure and construction team:

“The mood music surrounding the sector has become more upbeat in recent weeks, with healthy infrastructure pipelines a common theme coming out in our conversations with contractors.

While inflation remains sticky, the industry managed well through its peaks and there’s a feeling of confidence it will move in the right direction for the rest of the year.

Looking to longer term planning, contractors are ramping up investing in the skills needed to ensure they can deliver on the demand for projects key to decarbonisation. Those that invest today will be best placed to reap the rewards of the net zero transition.”

Conditions in the UK construction sector should improve this year, predicts Thomas Pugh, economist at RSM UK, unless the Budget destabilises the situation.

Following this morning’s construction PMI report, Pugh says:

‘The gradual recovery in the construction industry continued in February, despite the exceptionally wet weather, driven by an improvement in housebuilding. And there are valid reasons to expect things to pick up in the second half of this year. House prices have started rising again and there is a tentative recovery in the housing market that should accelerate into the rest of this year as interest rates start to fall in the summer, assuming there are no misadventures in the Budget this afternoon. All this should support housing construction.

‘At the same time, lower inflation and tax cuts will drive increases in real wages further supporting housing affordability. What’s more, lower interest rates, the continued return of office working and stronger business confidence will help commercial development.

‘There was a little sign that the crisis in the Red Sea is hampering construction efforts with the suppliers’ delivery times index falling to 50.6, indicating that it is becoming harder to get materials, but this is still far above the levels reached during the pandemic-induced supply chain crunch, suggesting that it is not having much of an impact on the industry.

‘Overall, the first half of this year will remain tough, but there are clear signs that the industry is recovering and the outlook is brighter for the second half of 2024 and into 2025.

UK construction sector stabilises as housebuilding slump ends

UK businesses may not be top of Jeremy Hunt’s priorities today – after all, they can’t vote.

But firms are hoping to get something out of the budget – with some pressing the chancellor to drop a planned rise in business rates next month.

Back in the autumn statement, Hunt froze business rates for small businesses in England again, and kept a 7% reduction for retail, hospitality and leisure firms, but decided the standard multiplier (setting business rates for larger properties) would rise in April by September’s inflation reading of 6.7%.

John Webber, Head of Business Rates at Colliers, warns that firms could collapse unless the burden is eased:

“The Chancellor must cancel the business rates rises due in April for all businesses when he announces his Spring Budget next week, or the High Street will be put under even greater threat than it is already.” says

“If the Chancellor does not take action to reduce this rates burden, we will see more retail chains going into administration. Retail, Leisure and Hospitality Relief may have provided a temporary reprieve to the small shopkeeper or independent restaurant but gives no help to the big retail and leisure chains who are the anchor tenants in so many town centres and retail spaces and provide the opportunities for jobs.”