On 4 August, the Prime Minister, Boris Johnson, announced plans to invest £1.3bn ($1.7bn) in building projects and infrastructure and a further £2bn ($1.6bn) towards home improvements as energy efficiency grants. These investments are part of the government’s efforts to create jobs and boost economic growth and are expected to deliver an estimated 71,000 new homes and home improvements for over 600,000 homes, as well as create about 85,000 jobs. Moreover, these investments would also facilitate the reduction of about 65 million kilograms of CO2 emissions across the country.
According to the announcement, £900m ($1.2bn) will be invested through the ‘Getting Building Fund’ in over 300 ‘shovel-ready’ home building and infrastructure projects. The projects have been identified and approved with the help of mayors and local enterprise partnerships, and the investment is expected to deliver an estimated 45,000 new homes. Apart from homes, the projects also include commercial space, such as the £23m ($29m) allocation for phase 1 of the development of Mayfield Park in Greater Manchester and infrastructure projects such as the £12m ($16m) Thanet high-speed railway station. Another 26,000 homes will be delivered through an investment of £360m ($469m) in Mayoral Combined Authority areas through its £400m ($521m) Brownfield Fund. The remaining £40m ($52m) from the Brownfield Fund will be allocated later.
The £2bn ($2.6bn) Green Homes Grant scheme will be utilised by the government to fund expenditure on home improvements on more than 600,000 homes to make them more energy efficient. The grants will cover 100% of the overall expenditure, with a limit of £10,000 ($13,040) for lower income households and up to two-thirds of expenditure with a limit of £5,000 ($6520) for other households. Home improvement works covered under the grant include double glazing and insulation of floors, roofs and walls, as well as installation of heat pumps, solar thermal, heat controls and energy efficient doors. Apart from the Green Homes Grant, the Johnson government has also announced the creation of a £1.1bn (£1.43bn) fund for public buildings, including educational, healthcare, and social housing buildings.
The government has already taken several steps to bolster the housing and overall construction market, which includes an announcement of raising the threshold for stamp duty on house sales, from £125,000 ($163,010) to £500,000 ($652.040) on 8 July. This change, which has been taken in order to boost the real estate market, will be in place until 31 March 2021, and will help both home buyers and sellers. Another step was the extension of the ‘Help to Buy’ scheme, which was announced on 31 July. The extension to the popular scheme, which has helped 272,852 property sales since it started on 1 April 2013, means the deadline for completing on new homes has been shifted from 31 December to 28 February 2021, although the legal date of sale completion still remains 31 March 2021.
Earlier in March, Rishi Sunak, the chancellor, had announced a commitment of £12bn ($15.7bn) to the Affordable Homes Programme, which marks an increase by one-third of the existing five-year commitment to the Programme, which is due to end in 2021. The announcement also included a one percentage point reduction in interest rates on the Public Work Loans Board that is utilised by local authorities to fund housebuilding.
Data released by the Office of National Statistics (ONS) continues to paint a grim picture of the construction market in the country, with output in May contracting by 39.7% year on year. This follows from a steeper contraction of 44.3% in April. However, on a month-on-month basis, the May data shows growth of 8.3%. Despite this, the cumulative data till May shows that construction output has shrunk by 18.4% over the same period in 2019. A recovery in the second half of the year is likely if the country avoids a second wave of infections, particularly as construction sites had mostly reopened by the end of June. Given the historically low output figures in May and April, there will be strong monthly sequential growth in the next few months. Although the UK will recover, to post annual average growth of 3.0% in 2021-2024, in real terms total construction output will only return to 2019 levels in 2024, reflecting the wider economic challenges that will prevent a fast recovery.