Autumn Statement 2022: What to expect in 2023

In the Autumn Statement 2022, the government has announced a number of measures to boost economic growth and productivity, including investment in high-quality infrastructure, placing the UK Infrastructure Bank on a statutory footing, and committing to the government’s transformative growth plans for railways. The government also remains committed to supporting digital infrastructure investment and securing the UK’s energy security, but what does this mean for the construction industry?

In this article, Adam Roper discusses the Spending Review and what this means for the construction industry in 2023 and beyond.

Spending will be maintained for certain key projects

The chancellor spoke about infrastructure as one of three crucial growth priorities and articulated that the government would “not cut a penny from our capital budget” in the next two years. Additionally, spending levels would be consistent in cash terms for the proceeding three years. Even though this policy shift means that planned growth for the capital budget won’t come to fruition, Hunt noted £600bn will still be spent over five years.

The Three key growth priorities mentioned in the Autumn Statement 2022 were infrastructure, digital infrastructure, and energy security.

Infrastructure

Hunt noted that £600bn would be spent over five years on infrastructure projects, which is great news for the construction industry. However, some projects have been pushed back due to government policy changes. For instance, the high-speed rail link between London and Birmingham will now be completed in 2040 rather than 2029.

Although some projects, such as the Northern Powerhouse Rail and East West Rail, will continue as planned, others will be cut back. The chancellor has committed to delivering the “core” scheme for Northern Powerhouse Rail, the High Speed Rail 2 link to Manchester and to the Sizewell C nuclear power plant. However, spending in real terms will be reduced in the later years of this parliament, which means that although the value of activity remains unchanged, the volume will decrease. This is according to information from the Construction Products Association.

Digital Infrastructure

The government also remains committed to supporting digital infrastructure investment through Project Gigabit, with an ambition to reach at least 85% gigabit-capable broadband coverage by 2025 and nationwide coverage by 2030. The hope is that all parts of the UK will have access to high-speed and reliable broadband so that economic growth and productivity can increase.

Energy Security

The The Autumn Statement proposed that businesses making sizable profits in the energy sector contribute more through increased taxes. In order to do this, the Energy Profits Levy will rise by 10 percentage points, from 25% to 35%, and be extended until 2028. Furthermore, a new electricity generator levy of 45% will apply to returns made by electricity generators for the next two years.

In addition to direct support, the government is aiming to reduce energy consumption by 15% by 2030. This will be delivered through investment from the public and private sectors, as well as a variety of cost-free and low-cost measures to reduce energy demand.

The government has reaffirmed its dedication to developing a sturdy base for energy independence and achieving net zero emissions. To achieve this, the government will focus on delivering existing projects rather than solely relying on growth plans that may not come to fruition. This delivery will be made possible through strategic reforms to the current infrastructure system.

Potential negative impacts

Growth is expected to largely slow until a minimum of 2024 because of many large schemes like HS2 and Hinkley Point C that are currently underway. With projects being rescheduled for later years in the government’s current Spending Review, this will most likely continue growth reduction into future periods.

Despite recent promises from the government of more infrastructure funding, the legacy of restricting both local and central government spending is likely to continue.

The North of England will likely be negatively affected. The chancellor has rejected calls to scrap HS2; however, there was no mention of a commitment to extending HS2 trains to Leeds.

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