Executive opinion Statement of intent
ECA group chief executive Steve Bratt assesses the impact of recent government announcements – and whether they will deliver for the electrical contracting industry
A
few weeks on from the Budget and after all the headlines about ‘granny taxes’ and ‘pastygate’, it’s probably a good time to refl ect on its longer-term implications for our industry.
Clearly, the business environment facing members is still extremely challenging. ECA members continue to feel the effects of the recession, and consumers and contract clients alike remain cautious about spending. So will the measures introduced in the Budget really have a positive impact for the industry, enabling Britain to ‘earn its way out’ of the double- dip recession, as George Osborne hopes?
Overall, economic indicators over recent weeks have been mixed. There have been some positive signs in the general economy, such as a slowdown in the rate of unemployment and a downward trend in infl ation. The Offi ce for Budget Responsibility (OBR) has slightly revised up its forecast for GDP growth in 2012, from 0.7 per cent to 0.8 per cent, with growth in 2013 expected to rise to 2 per cent, and in 2014 to 2.7 per cent. However, underlying forecasts for the construction sector remain gloomy – the Construction Products Association expects to see output declining by more than fi ve per cent in 2012 and no signifi cant increase until 2014. Ahead of the Budget, the ECA was actively engaged in encouraging a number of policies, including promoting increased spending on infrastructure. The impact of construction spending on the UK economy is well established and hugely significant – for every £1 spent, £2.84 is contributed to GDP*. As such, overall we were not too dissatisfi ed as far as infrastructure spend was concerned. There are still some questions remaining, though, about how this funding arrangement is going to work.
Pro-business Broadly, there weren’t any surprises in the Budget. It was generally pro-business, with some welcome policies. We were very keen to see both skills and growth dealt with, and there was mixed news. On the positive side, the government has made a commitment to fund additional adult apprenticeships – though, as usual, it’s diffi cult to see how much real growth there is. Importantly, we need to make sure that money is spent on something that has a constructive outcome. It was encouraging, then, for the government to announce that an apprenticeship must now run for at least 12 months to get funding – even though our industry, of course, is one that
requires a far longer, more thorough apprenticeship. However, the funding arrangements for the provision of
apprenticeships are critical. What still needs to be addressed is an equalising of spend on apprenticeships; up until age 18, there is a signifi cant spend, but then it reduces. This makes it diffi cult for small- and medium-sized businesses to train people when funding is structured in such a way. On the construction side, the ‘Get Britain Building’ initiative
Looking ahead, there remain considerable opportunities within the green agenda for ECA members
has been allotted an extra £150m on top of £420m already allocated, which will support the delivery of up to 16,000 new homes. Also, we hope the National Planning Policy will help simplify planning and cut red tape, making it easier for developers to commission projects vital to kick-start our economy. We also welcome the support from the pension funding strategy announced by the government. In addition, the introduction of the National Loan Guarantee Scheme and the Enterprise Guarantee Scheme are important at two levels – enabling funding for clients, to give them the opportunity to invest in projects, and also to help smaller businesses, in particular, invest in new areas. We are also pleased to see a cut in corporation tax and, among other positives from the Budget, key issues about health and safety regulations will be addressed too.
About the author
Steve Bratt Steve Bratt was appointed group chief executive offi cer of the ECA in October 2010. He joined the ECA as chief operating offi cer in 2007, and became deputy CEO in February 2010.
Green agenda Away from the Budget, some uncertainty has been removed by the Supreme Court’s decision to quash the government’s FITs appeal, and DECC outlining a more predictable approach to managing FITs. Looking ahead, there remain considerable opportunities within the green agenda for ECA members to use their expertise to implement low carbon technologies and energy effi cient solutions. Nonetheless, there are still serious question marks over elements of the government’s green policies. Key issues about the Green Deal need to be resolved before its proposed launch in the autumn. The ECA is recommending that DECC works to encourage ‘active’ energy saving measures as well as ‘passive’ ones, and we need joined-up thinking to link the Green Deal and FITs as part of a coherent green energy strategy. Elsewhere, the decision by EON and RWE npower to abandon plans to build new nuclear reactors in the UK is a major setback to one of the fundamental parts of the government’s low carbon energy strategy, and raises signifi cant questions. The government has to get the answers right – the lights can’t be allowed to go out.
*According to UKCG research, Making the economic case for construction May 2012 ECA Today 19
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