As Labour’s first Budget in more than a decade promises fresh investment, the sector must grapple with new tax burdens, ambitious spending pledges and lingering gaps in planning reform. Can the built environment industry expect genuine progress, or is this another exercise in managing decline?
This Labour government has inherited what might politely be described as a challenging economic legacy. Fourteen years of sluggish growth and falling incomes, a public realm creaking under years of neglect, and five Conservative prime ministers in rapid succession, oscillating wildly from austerity’s bleak belt-tightening to bouts of equally dizzying spending and borrowing.
Brexit? Its benefits remain as elusive as ever. Beyond abolishing the VAT exemption for private schools – a move that may quietly dent the income of architecture firms long sustained by elite school commissions – the UK’s accomplishments here remain sparse. The previous government failed to attract long-promised major investment or deliver significant benefits from leaving the EU, despite years of promises.
Enter Rachel Reeves, the new chancellor, who was tasked with tackling a seemingly permanent fiscal deficit while aiming to ignite growth. Her Budget, structured around a capital spending boost of £100bn over the next five years, raises serious questions for the architecture sector.
There is no question that Reeves’ vision for long-term investment speaks to architects’ hopes for a more stable economy
Schools will see a real-term capital uplift of 19% and £1.4bn for rebuilding – a long-awaited nod to the dire state of Britain’s educational infrastructure. Yet architects familiar with the recent uptick in school projects may wonder if this funding will arrive in time or if inflation will whittle it down to yet another modest patch-up.
Still, there is no question that Reeves’ vision for long-term investment speaks to architects’ hopes for a more stable economy. Her focus on infrastructure, education and healthcare, for instance, could mark the beginning of a long-awaited period of renewal for these critical sectors.
Yet, without substantial support for design quality and an appreciation for how construction works, the sector risks continuing to be locked into outdated practices, missing opportunities to modernise and deliver a more sustainable built environment.
Meanwhile, the increased investment in local planning authorities, which includes hiring and training planners, could be a boon for architects aiming to navigate the often protracted approval processes. However, without broader regulatory support, this limited injection of resources might feel like a half-measure.
Transformative development – whether in urban centres or within new sustainable housing initiatives – will require more than just an expanded planning workforce. It will depend on policies that prioritise well-integrated, transit-connected communities over sprawl and car dependency.
The tax hikes and increased burden on business – specifically, an increase in employer national insurance contributions – are expected to impact firms’ profitability, potentially cooling hiring plans just as investment increases. There is a reliance on small and medium-sized enterprises (SMEs) in the architectural profession, and these are especially vulnerable to fiscal pressures. Employees are also likely to notice a downwards pressure on pay awards.
The government’s planning reforms, combined with Reeves’ capital spending plans, offer an intriguing potential to spur growth, with efforts to untangle bureaucratic knots in local councils and boost planning departments. Yet, without a firm Labour vision for what makes good places to live, there is a real risk of reigniting the long-running trend of urban sprawl, potentially worsening the UK’s car dependency and creating communities that lack genuine social infrastructure.
Success for Reeves will hinge on whether these measures genuinely instil confidence in architects and investors alike
Architects and the wider construction industry would be entirely justified in pondering to what extent this government fully understands – or appreciates – the built environment’s contribution to the UK economy, or how best to unleash its potential. With the sector’s capacity to drive sustainable growth, elevate public spaces and reduce carbon emissions, a clear vision and robust policies from government are essential to fully harness these benefits, ensuring that the built environment truly supports the UK’s economic and social priorities.
The Budget’s allocation of £500m to the affordable homes porogramme, though welcome, remains insufficient to address the scale of the housing crisis. As RIBA president Muyiwa Oki pointed out, “given the huge demand for housing, the £500m top-up to the affordable homes programme is desperately needed. But this pocket-sized sum isn’t going to deliver a home for everybody who needs one, including the hundreds of thousands of people waiting for social housing”.
The budget’s reforms to Right to Buy finally tackle a longstanding issue, allowing local authorities to retain the full receipts from social housing sales – a move that’s decades overdue. This shift gives councils the means to reinvest directly in building new homes, offering a pathway to replenish and expand social housing stock. These changes represent a much-needed corrective to a policy that, until now, has eroded the availability of affordable housing without providing councils the resources to address the gap.
The sector’s demand for more ambitious funding and policy support is clear, as architects and urban planners continue to advocate for long-term, large-scale investment that aligns with the urgency of the housing shortage.
The Budget’s most frustrating omission? The hoped-for VAT relief on refurbishments, which could have galvanised the industry towards retrofitting and revitalising Britain’s ageing, poorly insulated housing stock. As it stands, architects and developers face the uphill battle of scaling back emissions while grappling with a significant tax burden on projects that aim to retrofit rather than replace.
The lack of this relief means missing a key opportunity to drive a retrofit boom that could both reduce emissions and household energy costs.
Overall, while Reeves’ plan undoubtedly marks a turn towards addressing long-standing infrastructure issues, it is no panacea. Architects – especially those at the helm of their own practices – may feel the pinch of increased contributions and tax changes, facing difficult decisions around hiring and how to maintain profitability.
Success for Reeves will hinge on whether these measures genuinely instil confidence in architects and investors alike, catalysing not just short-term improvements but sustainable, lasting growth across the UK’s built environment.
As many industry leaders agree, this Budget lays down a solid path. But it will take far more boldness and a bit more ambition to make architects – and the country as a whole – believe in the future that it promises.
>> Also read: Architectural profession reacts to autumn Budget 2024: Calls for greater ambition alongside boost for investment
>> Also read: ‘Invest, invest invest’: Budget sets out plans for £100bn capital investment
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