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Takeaways from the Budget

Reactions to this Monday’s Budget have been mixed, but there were a few notable developments that will be directly relevant to ECA members.

Considering how close we are to Brexit, it was good to see funds earmarked for industry, based on the Government’s growth assumptions of 1.6% in 2019, 1.4% in 2020, 1.5% in 2021 and 2022 and 1.6% in 2023.

Perhaps most notably, small businesses are in line for a boost from this Budget. Extensive lobbying by ECA, BESA and partners in recent months helped government to realise that it must offer more support to apprenticeships. The announced halving of non-Levy apprenticeship contributions should help SMEs to take on more apprentices, to the benefit of virtually everyone in our sector.

Elsewhere, there were positive signs for rail investment, with additional development cash, along with a statement that the current EV charging subsidy will remain until 2023.    

How does it line up with our targets?

Ahead of the Budget, ECA and BESA issued a five point plan to Chancellor Philip Hammond, including proposals on off-payroll working (IR35*), technical skills, fair payment, cash retentions and low-carbon investment for buildings and infrastructure:

  1. Prompt payment - Make prompt supply chain payment a formal part of the government’s selection process for larger suppliers, and have specific rules to exclude them from the public sector procurement process if a bidder fails to assure it will pay all suppliers within 30 days.
  2. Retentions – Take decisive action to reform and overhaul the existing cash retentions system, which currently results in SMEs having their day-to-day cash flow restricted, as well as losing what they are owed if the company holding the retentions goes insolvent.
  3. Low carbon investment – Offer businesses incentives to invest in ‘low-to-no’ carbon energy projects by improving tax and regulatory policies aimed at engineering businesses, particularly SMEs.
  4. Off-payroll working – The Government must significantly simplify the employment status test before imposing new compliance processes on SMEs in the private sector. Without simplification, small and medium-sized businesses could face costly new administrative burdens.
  5. Supporting engineering skills - Government must actively recognise the vital importance of engineering to the economy, and consequently invest in technical skills. More money is needed for investment in technical retraining, and R&D. Non-levy funding for apprenticeships should also be maintained.

The final two points of the plan - off-payroll working and support for skills – were reflected in the Budget. However, no further mention was made of the collapse of Carillion and the payment issues that precipitated it, and there was nothing of note on the UK Clean Growth Strategy, or any specific ambitions for lower carbon buildings.

Overall, Octobers’ Red Box included some of what we are looking for. Even so, with ECA’s active involvement on the Construction Leadership Council’s Value Sector Deal Groups and Cabinet Office SME Advisory Panel, and the ground swell of political and other support for the Aldous ‘retentions in trust’ campaign, the prospect of significant reform on payment and retentions still feels more likely than ever.


* The Chancellor plans to change the way self-employed people working for companies are taxed, by extending the public sector IR35 system to the private sector. The Government move is aimed at ensuring that individuals who work through their own companies, but operate like employees, are classified as employees for taxation and national insurance purposes.