The Autumn Statement 2024 brings uncertainty to the construction sector amidst rising tax burdens.
- The UK’s tax burden has steadily increased over 20 years, with forecasts suggesting further hikes.
- Concerns over insufficient skilled labour buoy growing apprehensions within the industry.
- The government aims to increase capital gains tax, affecting investment in construction.
- Calls for stable tax platforms grow as market uncertainties limit investment opportunities.
In the years leading up to the Autumn Statement 2024, the UK’s tax burden has been on an upward trajectory. Beginning at just over 32.6 percent of GDP in 2002, it rose to 35.3 percent in the 2022-23 financial year and is projected to reach 37.7 percent by 2027-28. This rising tax pressure puts further strain on the construction sector, which is already grappling with market uncertainties.
One critical concern within the construction industry is the lack of skilled labour. According to the OECD, nearly 20 percent of the UK’s male working-age population is not participating in the labour market, marking the highest inactivity rate among developed economies. Coupled with the fact that median male real income in the UK has stagnated over the past two decades, the industry faces challenges in making construction jobs financially rewarding and attractive.
Amidst these challenges, the government is contemplating an increase in capital gains tax. While considered a politically palatable move, such a change could render investment in construction less enticing if the resulting tax revenue does not lead to growth or new profit opportunities. The construction of 1.5 million homes this parliament term faces potential setbacks without significant industry changes to improve housing and regeneration scheme viability.
A stable tax platform is deemed crucial by industry professionals, as represented in a recent survey of construction and property experts. The continued market uncertainty preceding the budget announcement is cited as a primary obstacle to investment. The government’s initiatives to unlock the ‘grey belt’ and focus on infrastructure projects of economic consequence, like the proposed Universal Studios in Bedfordshire, signify efforts to bolster the sector.
Additionally, the possibility of a tax hike on carbon, notably petrol prices, is anticipated. Despite the reduction in petrol from 156p to 133p per litre over the past year, a significant tax increase could have indirect impacts on construction costs, highlighting the need for price stability to ensure growth.
The construction sector remains in a precarious position, reliant on decisive government action to foster stability and growth.
