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GGP August 2015

Iain McIlwee, CEO of the British Woodworking Federation This is a complex budget for businesses in our sector, the true impact of which probably won’t be known for a while. There was a very positive announcement recently about the Housing Growth Partnership initiative to bring in added support for small builders. The government’s continued commitment in this budget to new home building and infrastructure is also very welcome. But our concern is that it may, on closer scrutiny, turn out to be a budget of indirect and hidden costs to the construction industry. Changes to tax breaks Like others, we have serious concerns about the future security of income for housing associations and their likely ability to maintain their development or refurbishment programmes. Affordable housing is already on its knees. Changes to the tax breaks for private landlords are less than expected, but could also impact on the funds available for domestic RMI work (home repair, maintenance and improvement), which is so essential to the refurbishment to our ageing housing stock. And looking at the direct impact on SMEs in the construction supply chain, while an increase in the minimum wage for the lowest paid is welcome, we cannot ignore the fact that such increases have a knock-on effect throughout a business, creating inflation in a firm’s total wage bill. Our latest State of Trade survey among Britain’s joinery manufacturing firms already reveals that 73% of respondents had seen a sharp increase in labour costs, and this is fast becoming a constraint on business. Wage inflation and other increases in the cost of doing business, such as the IPT increase, will need to be properly offset by the cuts in Corporation Tax and increases in employment allowances. 6 NEWS Summer Budget: industry reaction Mike Crewdson, Emplas more than £9 per hour – a George Osborne’s Summer Budget potentially crippling cost for many was about cutting the welfare bill fabricators unless it’s passed on to and ‘making work pay’. their customers. But the decision to increase the If this was the ‘bane’, George national minimum wage, now Osborne has suggested that the rebranded as the new living wage to ‘antidote’ for business is a 2% cut in more than £9 an hour by 2020, does corporation tax. This is welcome but create a challenge for business and you have to be making a profit for a for our industry in particular. cut on what is essentially a tax on The Office for Budget profit to have any real worth. Responsibility has said that the More positively, for those on decision will immediately benefit middle-incomes there were one or around 750,000 workers, while a two positive measures, which may further two million should benefit by add a little more buoyancy to the 2020. It forecasts that the wages of retail sector, most notably, the low paid workers will increase across increase in personal tax allowance the board in response to the change. and an increase in the threshold for That people will have a little more the higher rate of personal tax – a money in their pockets is a good move which he claimed would spare thing but timing as they say, is 130,000 workers from the 40p rate. everything. We are now in recovery, The decision to cut buy-to-let tax but while in general things are up, breaks could also benefit the the trajectory of economic growth industry. From 2017, landlords will has been pitted with the occasional no longer be able to deduct all of trough – not least in the first half of their mortgage interest payments this year. We are also not immune as from their tax bill and the amount an industry from more far reaching that landlords can deduct for ‘wear issues of productivity, which and tear’, will also be reduced. combined with increased costs, could The aim of the measure is to try slow growth in the construction and level the playing field to get sector. more first time buyers onto the housing ladder, redressing the Negative impact balance by slowing the buy-to-let There is clearly work to do to housing market. improve the UK’s skills base – which For those of us adopting a glass should have by default increased productivity and business’ ability to pay higher wages to staff regardless of any legislative drivers to do so. But while this skills deficit is being addressed, the decision to increase the living wage could run counter to the Chancellor’s ambition and have a negative impact on job creation and growth. It also means that those manufacturers who have relied on cheap labour as the foundation of recovery without any accompanying investment in processes and equipment, may be forced to pass on costs to their customers. At Emplas we took a decision to continue to invest in our systems and factory floor equipment throughout the downturn. This has improved product quality and the service that we are able to offer to our customers but has also given us an element of immunity from the launch of a living wage at www.ggpmag.com August 2015 A ‘complex budget for business’ half full mentality, anything that increases the affordability of properties to first time buyers, has to be a good thing. They are also much more inclined to invest in home improvements than buy-to-let landlords. Those of a glass half empty persuasion, could equally be justified in thinking that the change will do little in real terms to increase the availability of homes to first time buyers and will in fact simply squeeze landlords, driving them to increase rents and making them less inclined to invest in any improvements to their properties at all. So to conclude, on balance, this is a mixed budget for business and for our industry. The gamble is whether the Chancellor’s measures continue to drive growth. If they do, the tax breaks for individuals and the creation of the living wage, means that we should all have a little more in our back pockets and if consumer confidence is higher, we may be more inclined to invest in home improvements. What it doesn’t do is to address a fundamental deficit in supply and demand in the UK housing market. This will be important in ensuring the sustainability of the housing market in the long term and with it, the UK’s wider economic recovery. Focus on the positives Roy Frost, MD, Deceuninck There’s always a rush to comment on a Budget, but rushed reactions often see the downsides first – what the Budget got wrong and opportunities missed. Maybe waiting two weeks makes the difference, but on balance it seems to be a positive, relevant Budget for the industry. Deregulation and relaxing planning permissions to encourage building could be the spark that moves the industry up a gear. Removing the barriers to building homes is a good thing for our industry. With every new house built you encourage someone to take their first step onto the property ladder. But many new homes are bought by existing homeowners and moving house is one of the biggest triggers for home improvements. Not every move triggers an immediate burst of home improvement, but most are improved sometime in the next five years. Moving home has a ripple effect. Whatever they improve, it’s good for the industry. More new homes built leads to more home improvements which leads to more doors and windows. The Chancellor didn’t do all we’d like him to, but he created the conditions for good steady growth. Good news, surely?


GGP August 2015
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