What does the 2023 Spring Statement mean for the Midlands?

With a number of headline-catching measures announced last week in the Chancellor’s first budget of 2023, the construction sector has been assessing some of the key elements that focused on infrastructure and development.

Nick Gibb, our deputy managing director for the Midlands, takes stock of what the budget will mean for an industry that has been facing huge challenges, from regional variations to the rising cost of materials and energy…

What are your key thoughts on what the budget means for the construction industry?

It’s been really encouraging to see several provisions aimed at stimulating the market and also ensuring our regional variations are reflected in the plans.

Construction is a major part of the UK’s economic success, but the industry has been going through a mini-crisis. There has been a massive shift in the price of both materials and energy and, combined with the effects of Brexit, Ukraine and the aftermath of the pandemic, people have faced huge challenges to make projects viable.

This viability of projects is a concern with the cost versus end value no longer marrying up. There has been an increase in the number of smaller construction companies going into administration in the last 18 months or so. Typically, this has been caused by schemes stalling that would have, historically, sailed through without a problem.

However, with a budget allocated for investment zones, regeneration projects, levelling up and trailblazing devolution deals, there are plenty of opportunities for the construction industry.

The government’s plans to create 12 new investment zones across the UK, each receiving £80m over five years to drive growth, have been welcomed. What is your view?

It’s good to see that these investment zones are reflecting geographical regions and will include both the East and West Midlands in the 12 locations, providing opportunities for tax relief and incentives as well as grant funding.

Investment zones will be located near research institutions such as universities and be focused on driving new, sustained growth in key sectors such as digital and technology, creative industries, life sciences, advanced manufacturing and green industries. All constituent parts that drive our local economy.

With the aim of propelling growth and identifying private sector match funding, the investment zones should act as a catalyst to give projects momentum and boost confidence. This in turn will create a ripple effect to regenerate the town or city – raising the value of the area to stimulate further investment on its path to future self-sufficiency. It will also be interesting to see if this approach begins to shape what the built environment needs to look like to support the goal of creating clusters around high-potential industries.

Focusing on research institutions, such as universities, to help give the UK a competitive advantage is crucial, in my opinion, to keeping skilled talent in the area - in particular recent graduates who often leave smaller cities for bigger cities or the bright lights of London. Usually, this is because the area they currently live in can’t fulfil their needs and aspirations around work, lifestyle and social activities.

By encouraging more and more companies to focus on the regions outside of London for their offices and operations, coupled with local authorities providing the right mix of live, work and play, skilled talent will be more tempted to stay, helping cities to retain these skillsets and the wider benefits that come with it.

What effect will the £400m for levelling up projects in 20 areas across England have?

Levelling up has similar ambitions to the investment zones to help invigorate the economy and improve the UK’s towns and cities. The Budget announced the rollout of Levelling Up Partnerships to provide bespoke placed-based regeneration across 20 locations as well as £211m for 16 regeneration projects and £161m directly to the Mayoral Combined Authorities.

We have been talking to existing and potential customers who have impressive aspirations and are receiving the levelling-up funding (LUF) for a while. Lots of work has been done in the background, so it’s great that they have been recognised and can now move ahead with a level platform to work from.

One of our key takeaways from our experience of working with customers to put together successful LUF bids is around the viability of the project from a timescale perspective. It is vital that local authorities are ready to move forward quickly with their planned projects once they are given the green light to ensure they can spend funds by the allotted deadline. Experience has shown us that using the right framework, along with early engagement with contractors and architects, makes a huge difference in the success of a bid.

I’m also encouraged to see that levelling up funds are not just going to the prime tier-one cities – they're also for the areas in and around those cities that equally need help. Many of them have been struggling and it’s important that we look at how to repurpose sectors such as city centre retail and offices.

We are witnessing a big shift in society, including more online shopping and hybrid working arrangements so these locations need to adapt. I’d like to see more mixed-use environments with living, working and leisure provisions all in the same space. It will be fascinating to watch these spaces develop.

We have supported a number of customers with their LUF bids, most recently we supported a successful bid for the regeneration of Boston Town Centre in Lincolnshire, pictured above

How will the ‘deeper’ devolution deal for the West Midlands Combined Authority (WMCA) be effective?

It’s a good thing, in my opinion, that money and powers will be handed directly to the Mayor of the West Midlands to choose how to spend the funding.

I’m a big fan of devolution and, approached in the right way, it puts control in the hands of those who understand the area, its priorities, and dynamics. They have an inside knowledge, which is very difficult for those at a distance to understand.

Such moves also act to fuse an area. Birmingham might be the focal point but the greater Birmingham area ties in a lot of local authorities and places where people live - it’s good to recognise that it’s a regional issue and not just a city one.

What are your thoughts on future progress?

The extraordinary inflation we’ve seen has helped to create some of the problems but hopefully now there will be a calming of the market and a correction on material prices as the UK economy grows.

I’ve already mentioned the investment zones and how they could help to retain talent in the area – but there is also a much bigger picture here.

With investment zones spending the funds on the specific cluster sectors mentioned above, there is real opportunity for the Midlands to capitalise on this opportunity. We have always been a manufacturing powerhouse, so it is possible that this investment will go towards strengthening the advanced manufacturing cluster we have already formed.

That being said, it will be interesting to see the direction that leaders in the area choose to pursue. They could try to introduce an additional cluster to the Midlands to offer a wider variety of opportunities for people living in the area, which could cause an evolution in the identity and culture of the region, and therefore what the built environment needs to look like.

Overall, this budget is about levelling up the regions, linking them together and tipping the scale back towards viability. This will hopefully provide some confidence in the construction sector and get the pipeline of work moving again across multiple sectors and industries.

Speak to our team today.