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This article was first published on LexisPSL Construction on 19 March 2014. Click here for a free 24h trial of LexisPSL.

The Budget 2014 for construction lawyers

19/03/2014 Construction analysis: With the Chancellor's speech still ringing in our ears, we bring together the most important features of the Budget 2014 for construction lawyers alongside expert analysis and industry comment.

What was relevant in the Budget for construction lawyers?

Budget 2014--TIIN: Business Premises Renovation Allowance, LNB News 19/03/2014 219 Only the direct costs, such as the cost of construction and related professional services, of converting or renovating an unused business premises in order to bring it back into business use will qualify for relief under the Business Premises Renovation Allowance (BRPA) as of 6 April 2014. Budget 2014--TIIN: Enterprise Zones--enhanced capital allowances, LNB News 19/03/2014 234 The period in which businesses investing in new plant and machinery in enhanced capital allowance (ECA) sites in Enterprise Zones can qualify for 100% capital allowances is extended for a further three years to 31 March 2020. Press Release: Chancellor announces major boost to housebuilding, LNB News 17/03/2014 133 The Chancellor has announced a major new housing development as well as plans to extend the government's Help to Buy equity loan scheme. The 200m boost to housebuilding will provide up to 15,000 new homes in Ebbsfleet in Kent. In addition, the Help to Buy scheme will be extended to 2020, with a further 6bn being invested to assist 120,000 households in purchasing a new home. Construction Industry Scheme The government will consult in summer 2014 on options to improve the operation of the Construction Industry Scheme (CIS) for smaller businesses and to introduce mandatory on-line filing for contractors. The government will also hold discussions with industry on revisions to reporting obligations and improvements in registration for joint ventures.

What does this mean for construction lawyers?

What are the headlines of this year's Budget? Nick Lane, partner in the real estate team at Mischon de Reya: The take out for construction lawyers from today's Budget will be its focus on the residential side of the market--especially new homes. Growth more generally should also mean more contracts to be drafted and more dispute resolution work. In terms of the specific underlying Office for Budget Responsibility predictions on which the Budget is based, there are certain key points of interest:

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the improved UK growth prediction of 2.7% for 2014 and 2.3% for 2015, and the predicted extra 1.5m jobs over the next five years

Some of the new jobs will be in the industry and the improved overall growth should be reflected in growth in the construction sector specifically. However, since last autumn the growth predictions for the longer term (2017 and 2018) have been revised downwards which means the growth is likely to continue to be fairly modest. The Chancellor's specific request to the Bank of England to keep an eye on the possibility of a housing bubble is notable. If what looks like it might be a bubble bursts, then all bets will be off. The balance between trying to get new homes built and not rocking the market remains a fine one. If there are any headline measures for construction, they are likely to be: o the building-related measures aimed at supporting 200,000 new homes, namely: o the 150m made available for self-build the extension of the Help to Buy loan scheme to 2020 the building of the new garden city at Ebbsfleet

transport-related measures, including: the approval of 270m funding for the Mersey Bridge extra spending for road and flood repairs the availability of 200m for pothole repair

On the building front, even if 200,000 new homes are built, it will not happen quickly and there is nothing exciting to report from an infrastructure perspective. So, overall the Budget is more ground-repairing than ground-breaking. A measure of the conservatism of this Budget is that for those construction lawyers who like their beer they will need to be drinking between 300 and 400 pints before the reduction in duty of 1p per pint will buy them a pint. Ann Minogue, partner in the MacFarlanes' construction group: As predicted, some help for house-buyers: o the proposed new 'garden city' (described by the Royal Institute of Chartered Surveyors (RICS) as 'really just a garden village') in Ebbsfleet (wasn't planning permission granted for this last decade?) given that the Environment Agency reported in 2009 that the new garden city was in a flood plain, an extra 140m for flood defence repairs and maintenance will be welcome the extension of the 'Help to Buy' scheme until 2020 is intended to help homebuyers on properties up to 600,000 the Builder's Finance Fund of 500m for small house builders to help support the building of more than 200,000 new homes

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So house builders and their construction lawyers should be busy (along with their conveyancing colleagues) but, as the RICS has said, this is 'a drop in the ocean' and doesn't do anything to deliver the right mix of homes. The Chancellor announced some help for infrastructure projects: o o o a 270m guarantee for Mersey Gateway bridge legislation to give the Welsh government tax and borrowing powers to fund infrastructure including improvements to the M4 200m to fix potholes

Will these help increase the workload of construction lawyers acting on infrastructure projects? Maybe, a bit. What about help for construction companies and the 'march of the makers'? The Chancellor:

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doubled the 100% annual tax allowance for investment to 500,000 froze the carbon floor price paid by business in a bid to cut energy bills--but not by much, and at the expense of its green policies doubled the amount of government credit available to exporters to 3bn and reduced interest rates by a third

So is this a game changer for construction companies? Maybe the tax allowances for investment will help start-ups in construction manufacturing but the construction industry will continue as a massive net importer of construction products and materials. Are there any surprises? Nick Lane: No. But that equally means that there aren't any nasty surprises. Ann Minogue: Not for the construction industry. Most of this is tinkering around the edges. The British economy may be growing at a faster rate than any other advanced economy (growth forecast up to 2.7% in 2014) but the job of recovery is 'far from done' according to Mr Osborne. Against the backdrop of the base rate at 0.5%, the Chancellor's measures to promote the 'makers' and the 'doers' are paltry. We may be 'building a resilient economy' but it is fuelled by cheap debt rather more than the Chancellor's budget tax changes. There were surprises though for construction lawyers at a personal level: o o o 20% of childcare costs for children up to the age of 12 up to a maximum of 10,000 from September 2015 will certainly help the finances of many construction lawyers they should be investing in new ISAs up to 15,000 a year tax free to reduce their tax bills and, while they are at it, buying a few more premium bonds--up to 50,000 in 2015 changes in restrictions on pensioners access to their pension pots and on taxation of lump sums on retirement will affect the retirement plans of construction lawyers over 45

What actions should construction lawyers be taking as the dust settles? Nick Lane: What limited dust there was has already settled and this Budget will be long-forgotten by this time next year. In the meantime it will be more of the same for construction lawyers. Make mine a pint of bitter please. Ann Minogue: Maybe: o o o whizz off on a long haul flight to celebrate the reduction in air duty visit their pensions adviser go to the pub for a pint--1p cheaper

Otherwise life goes on in pretty much the same way as before.

What has been the reaction from the construction industry?

Mark Harris, chief executive of mortgage broker SPF Private Clients: ''We welcome the 0.5bn allocated for small house builders, who struggle to raise finance. While self-builders will get 150m to support their "right to build" their own homes, one of the problems facing this group is that they are often outbid when it comes to securing a development opportunity in the first place, such as a bungalow on a nice plot which can be knocked down and rebuilt. Developers can bid for cash and regularly outbid the individual who doesn't have the same resources. Although there will be more money available, it might still be hard for individuals to really take advantage of it and secure a suitable plot.' John Allan, national chairman, Federation of Small Businesses: 'Extending Help to Buy on new build properties and committing to a new development in Ebbsfleet will maintain increasing confidence in the construction sector, which has risen significantly in the past year. To continue to build on this increasing optimism the Government needs to ensure that small firms can access contracts and work. The financial support announced for small house builders will therefore be welcomed.'

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Sir Merrick Cockell, chairman, Local Government Association: 'Much more can be done to build new homes, create jobs and stimulate the economy if local government's hands were untied by the Chancellor to drive this through at a local level. We will continue pressing government to unlock the potential of local areas to solve these national problems through putting local businesses, colleges and councils in control of tackling youth unemployment and giving local authorities greater freedom to invest in new housing and infrastructure.' Chris Temple, UK engineering and construction UK lead, PwC: 'House building needs a significant push, so it is good to see the 500m investment into small house building firms, which has obvious employment connotations too. However, space is at a premium, especially in London and the south-east, where the Chancellor identified a specific need for new housing. To really kick-start the industry, I would like to see greater incentives for public and private landowners to sell sites to developers. The 150m investment for people to build their own homes works well in parallel to the Help to Buy scheme--perhaps now people looking to get onto the property ladder will consider buying a plot at auction and starting from scratch?'

Want to know more?

A full overview of the Budget 2014 can be found here. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.