Sofie Hooper, deputy CEO of the APS picks out her takeaways from the government spending review.
Chancellor Rachel Reeves presented her Spending Review at the dispatch box on 11 June, covering the government’s spending until the end of parliament (2029).
APS, like much of the construction sector, broadly welcomes the Spending Review and with it the infrastructure projects and housing announcements made. More questionable, however, is the fact that the department responsible for delivering against much of the housing development and the Grenfell Inquiry recommendations is losing 1.4% of its budget.
Many of the spending commitments listed in the chancellor’s speech, especially those for capital infrastructure projects, were already in the public domain. Key areas of spending for construction were:
- £39bn for social housing over the next decade;
- Green energy projects;
- Various rail projects;
- New prisons;
- Changes to the value-for-money assessment the Treasury makes, which will see more built outside of London through place-based businesses cases;
- £1.2bn a year by the end of the spending review to support over a million young people into training and apprenticeships.
However, many questions remain about how the government will deliver against its plans, and then if the sector in turn can deliver against what is set out, given the skills crisis and ageing workforce.
The government had previously intended to publish its new Industrial Strategy alongside the Spending Review, as well as its Infrastructure Strategy, which establishes a 10-year set of priorities for infrastructure, providing some long-term direction and certainty for the sector.
The next fiscal event to watch out for will be the Autumn Budget in late October or early November, a date has not yet been set. We’ll then see if much of the speculation around taxes will materialise.
What is the spending review and additional publications expected
The Spending Review covers the government’s spending plans for the next few years, covering all the spending that can reasonably be expected to be planned in advance, making up about 40% of all public spending.
Budgets for the 2025/26 financial year were set at “phase 1” of the current review and were announced alongside the 2024 Autumn Budget. The latest announcement covers phase two and will cover the financial years 2026/27 through to 2028/29.
More background information about the 10-Year Infrastructure Strategy can be found in the Treasury’s Working Paper. The UK’s Industrial Strategy Green Paper was launched in October 2024, seeking input from across the UK.
The Construction sector, while featuring in the Green Paper, was not directly seen as a growth sector, although there are of course clear links with delivering against the net-zero objectives included in the Green Paper. The Industrial Strategy is also expected to provide a coordinate approach to deal with the skills gap currently holding back growth in the country and construction sector alike.
It is encouraging that the government is committing to spending on the built environment, green energy, infrastructure and so on, in the same way that it has recognised the urgency of building new homes. But as always, there is a need to match these objectives with realistic strategies for them to materialise.
The UK construction industry urgently needs a significant boost in its skilled and competent workforce, the availability of materials and components and capacity for offsite construction. Time is marching on and these parts of the industry need matching support and investment if progress is to be made within this parliament.
