Government’s Spending Review – initial APS highlights

Chancellor Rachel Reeves presented her Spending Review at the dispatch box last Wednesday, 11th June, covering the government’s spending until the end of parliament (2029). APS, like much of the construction sector broadly welcomes the Spending Review and with it the infrastructure projects and housing announcements made. More questionable however is the fact that the department responsible for delivering against much of the housing development and the Grenfell Inquiry recommendations is losing 1.4 percent of its budget. Many of the spending commitments listed in the Chancellors’ speech, especially those for capital infrastructure projects where already in the public domain. Key areas of spending for construction were:

• £39 billion for social housing over the next decade
• Green energy projects
• Various rail projects
• New prisons
• Changes to the value-for-money assessment the Treasury makes which will see more built outside of London through place-based businesses cases
• 1.2 bn a year by the end of the spending review to support over a million young people into training and apprenticeships

Many questions however remain about how the government will deliver against its plans, and then if the sector in turn can deliver against what is set out given the skills crisis and ageing workforce. The government had previously intended to publish its new Industrial Strategy alongside the Spending Review, as well as its Infrastructure Strategy which would set out a 10-year set of priorities for infrastructure, providing some long-term direction and certainty for the sector. However, according to reporting in the Financial Times, the Infrastructure Strategy will now be published this week (commencing 16th June), with the Industrial Strategy following it in the final week of June. APS will keep a watching brief on these announcements and will consider their impact on our members. The next fiscal event to watch out for will be the Autumn Budget in late October or early November, a date has not yet been set. We’ll then see if much of the speculation around taxes will materialise.

What is the spending review and additional publications expected? The Spending Review covers the government’s spending plans for the next few years, covering all the spending that can reasonably be expected to be planned in advance, making up about 40% of all public spending.

Budgets for the 2025/26 financial year were set at “phase 1” of the current review and were announced alongside the 2024 Autumn Budget. Wednesday’s announcement covers phase two and will cover the financial years 2026/27 through to 2028/29.

More background information about the 10 Year Infrastructure Strategy can be found in the Treasury’s Working Paper The UK’s Industrial Strategy Green Paper launched in October 2024, seeking input from across the UK. The Construction sector, while featuring in the Green Paper, was not directly seen as a growth sector, although there are of course clear links with delivering against the net zero objectives included in the Green Paper. The Industrial Strategy is also expected to provide a coordinate approach to deal with the skills gap currently holding back growth in the country and construction sector alike.

APS CEO Andrew Leslie comments:

"It is encouraging that the Government is committing to spending on the built environment, green energy, infrastructure and so on, in the same way that the Government has recognised the urgency of building new homes, but as always there is a need to match these objectives with realistic strategies to materialise them. The UK construction industry urgently needs a significant boost in its skilled and competent workforce, the availability of materials and components and capacity for off-site construction. Time is marching on and these parts of the industry need matching support and investment if progress is to be made within this parliament. We look forward to the publication of both the Infrastructure Strategy and the Industrial Strategy."