2011 Autumn Statement: construction implications

Practical Law UK Legal Update 1-514-0896 (Approx. 7 pages)

2011 Autumn Statement: construction implications

by PLC Construction

Background

On 29 November 2011, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement 2011, setting out the government's economic and fiscal plans to build a stronger economy. It also published a revised National Infrastructure Plan (NIP 2011) and the Plan for Growth: implementation update.

Although much of the Autumn Statement had already been announced (or leaked), for the construction industry, it includes some good news. For example, there was £6.3 billion of additional infrastructure spending (on roads and railways) over the Spending Review 2010 period and commitments to £5 billion of capital projects in the next Spending Review period, as part of the NIP 2011.

Infrastructure strategy

The Autumn Statement notes that high quality infrastructure is essential to the UK's competitiveness, but through years of a lack of investment, we are viewed poorly on the international stage. As a consequence, the government published NIP 2011 alongside the Autumn Statement. NIP 2011 brings together the UK's infrastructure networks and sets out a pipeline of over 500 infrastructure projects.

To finance NIP 2011, the Autumn Statement sets out a strategy for coordinating public and private investment in UK infrastructure. To ensure private investment, the government:

Has signed a Memorandum of Understanding with two groups of UK pension funds (including the National Association of Pension Funds, Pension Protection Fund, and a separate group representing pension plans and infrastructure fund managers) to support additional investment in UK infrastructure.
Is working with the Association of British Insurers (ABI) to set up an Insurers' Infrastructure Investment Forum.
Has committed to increasing capacity and improving performance on the A14, and will explore innovative ways of financing this work, including tolls.
Has announced its support for the extension of the Northern Line to Battersea. It will consider creating a new Enterprise Zone at Battersea and allowing local borrowing against the Community Infrastructure Levy (CIL) to support this, subject to a commitment by April 2013 from a developer to contribute and develop the site.
Will consider using transparent forms of guarantee to support specific projects where this provides best value for money for taxpayers and users.
Is increasing public investment in infrastructure, and has already announced the £500 million Growing Places local infrastructure fund and £150 million to expand mobile network coverage.

NIP 2011 notes that the Chief Secretary to the Treasury (Danny Alexander) has been asked to chair a new cabinet committee on infrastructure. This committee will monitor the delivery of the 40 identified infrastructure projects and programmes most critical to growth. The aim is to ensure that the government shows decisive leadership in tackling planning and regulatory delays and addressing key commercial and policy issues.

PLC plans to cover NIP 2011 in more detail. In the meantime for more information on NIP 2010 and the Government Construction Strategy, see Legal update, Government publishes National Infrastructure Plan 2010: construction, environment and property implications and Practice note, Government Construction Strategy.

Health and safety regulations

The government has accepted the key recommendations from Professor Löfstedt's review of health and safety regulation, Reclaiming health and safety for all: An independent review of health and safety legislation, including:

Exempting from health and safety law, the self-employed in low risk occupations (where there is no risk to other people, such as office workers).
Reviewing all 53 of the Approved Codes of Practice (ACoPs), to make them easier for employers to understand and to meet their legal obligations.
Consolidating health and safety legislation by April 2015. The government hopes to reduce the number of health and safety regulations by 50%. Specific areas that have been identified include explosives, mining, genetically modified organisms, petroleum and biocides.
The Health and Safety Executive (HSE) will work more closely with local authorities to ensure there is a consistent and proportionate approach to enforcement of health and safety regulations, with the focus on the most risky areas.
Reviewing those regulations that impose strict liability and either qualify the regulation with "reasonably practicable" or amend the regulation to prevent civil liability attaching to a breach of the regulations. Pre-action disclosure in personal injury will also be reviewed.
Working more closely with the EU on health and safety regulations.

For more information, see Legal update, Professor Löfstedt's health and safety report and government response published and Practice note, Reforming the UK's health and safety laws.

Green deal and environmental issues

The government is committed, through the Green Deal, to improving the energy efficiency of buildings to benefit both energy bill payers and the environment. As an additional one-off support for this, the government will allocate £200 million to encourage early uptake of the Green Deal in its initial phase over 2012-13 and 2013-14. Further details will be set out next year.

The government will invest through UK Green Investments (UKGI) in green infrastructure projects from April 2012, ahead of obtaining state aid approval for the Green Investment Bank (GIB). Non-domestic energy efficiency will be one of the priority sectors for UKGI, which will make available up to £100 million in the next financial year for commercial and industrial energy efficiency projects.

For more information on the Green Deal and GIB, see Practice note, The Green Deal and Legal update, Green Investment Bank to begin investing from April 2012.

Procurement and SMEs

The government has targeted SMEs and mid-sized businesses, to help build strong supply chains. It has announced a number of measures, including:

By April 2012, publishing medium-term plans setting out its procurement needs for other sectors. This will give suppliers the confidence to invest for the future and compete on a level playing field. (The government has already published procurement plans for construction, wider infrastructure, information and communication technologies and facilities management.)
Simplifying the procurement process to reduce burdens on industry through making better use of pre-procurement dialogue with suppliers to ensure procurement processes.
Through the National Loan Guarantee Scheme, making available up to £20 billion of guarantees for bank funding over two years. This will allow banks to offer lower cost lending to smaller businesses.
Extending the use of project bank accounts (currently being piloted on construction projects) as a means of ensuring both certainty and speed of payment to SMEs (see Practice note, Escrow and project bank accounts on construction projects: an introduction).
Simplifying EU legislation, such as negotiating for the Public Procurement Directives to be simplified (see Practice note, Public procurement in the UK).

Investment in roads and public transport

Investment in roads and rail is seen as a way to encourage investments and exports. This includes:

Investing £270 million for two motorway schemes to use the hard shoulder to increase capacity (on the M3 in Surrey and the M6 between Birmingham and Manchester).
Investing £100 million to accelerate the current major projects planned on the M25 (junctions 23-27) and the M1 (junctions 39-42).
Investing £150 million for major road improvements on the M1/M6 Junction intersection.
Improving the long-term capacity and performance of the A14, including widening sections.
Looking at funding road improvements through financing mechanisms such as tolls.
Improving access to Manchester airport, with £165 million invested in a new dual carriageway road linking the M56 at Manchester airport to the A6 south of Stockport.
In London, extending the Northern Line to Battersea.
Supporting Network Rail to invest £290 million to improve the railway network, including bringing forward bridge renewals, enhancing access to stations and improving resilience of the network to extreme winter weather.

Comment

The Autumn Statement 2011 acknowledges that the UK economy is recovering from the biggest financial crisis in generations. The June Budget 2010 set out the government's plan to reduce the deficit and rebuild the economy and the March 2011 Budget confirmed the government was continuing with its plans to reform the economy. Those actions may have restored stability and reduced market interest rates, but the cuts to public spending have hit the construction and engineering sector hard. Since then, the UK economy has been hit by a series of shocks that have significantly weakened the economic and fiscal outlook. Despite this, there are some positive steps that may help the construction and engineering industry, such as the government's announcements about investment in infrastructure (road and railways).

2011 Autumn Statement: construction implications | Practical Law