Autumn Statement 2014

Last Updated:

8th December 2014

The Autumn Statement was the Chancellor’s key pre-election opportunity to show that, under his stewardship, the economic recovery was now well underway and that the UK was outperforming other major economies. The official forecast from the OBR has again upgraded UK economic growth for this year from 2.7% to 3%. The pace of growth is still forecast to moderate, but to 2.4% slightly higher than previously forecast. The stronger economic performance will be especially welcomed by the construction industry, with economic growth of 2% or more usually a pre-requisite for higher construction output. Glenigan is forecasting a 7% rise in project starts next year.

Both increased business investment and household consumption, supported by a real rise in average earnings, are forecast by OBR to growth strongly over the next five years. This should support a further strengthening in private housing activity and commercial and industrial building projects.

In addition the government is continuing to bring forward measures to support more new housing development as it seeks to secure a long term increase in new housing supply whilst avoiding the ‘boom and bust’ conditions that have plagued the housing market in the past. The Autumn Statement report catalogues various specific measures aimed at bringing more site forward for development, ranging from new guidance restricting the imposition of section 106 and other levies on smaller sites, to a new Garden City at Bicester, support for specific housing & regeneration projects and the HCA taking the commercial lead on a 10,000 home development at Northstowe.

Furthermore Stamp Duty reform was the centre piece of the Chancellor’s Autumn Statement. The announced changes will remove long standing pricing distortions in the market caused by the tax and offers a welcome reduction in upfront costs for almost all house purchasers. In particular the reforms will narrow the deposit gap faced by first time buyers and should help re-invigorate housing market activity that has been cooling in recent months. The Chancellor’s move, combined with the prospect of real rises in household incomes, should help to sustain the recent growth in new private housing activity during 2015. Prime residential housing is the one loser from the Chancellor’s announcement which will add to the squeeze on high end property prices in areas such as central London that have already been impacted by the opposition’s ‘mansion tax’ plans.

The Autumn Statement did not provide any significant new central government investment. However in the run up to the Chancellor’s statement, the Government launched its Road Investment Strategy and the latest National Infrastructure Plan.

The Road Investment Strategy commits the government to invest £15 billion between 2015-16 and 2020-21. However, the strategy includes previous planned schemes including those already onsite and will not see any additional projects starting on site in the near term. Headline projects, such as the Stonehenge tunnel, are scheduled to start at the turn of the decade.

The National Infrastructure Plan includes £2,300 million of central government investment in over 1,400 flood and coastal protection schemes over the next six years. The Chancellor also announced plans to legislate to ensure that business contributions to flood defence schemes are tax deductible. The plan also details previously announced investment rail investment such as Network Rail’s £38 billion CP4 programme, completion of Crossrail & Thameslink and HS2.

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Kirsty Maclagan (Marketing and Communications Manager)

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Allan Wilén (Economics Director)

T: +44 (0)751 579 4625| E: allan.wilen@glenigan-old.thrv.uk