Rebuilding Britain: Does Labour's first budget deliver for the built environment?

This week, the Labour Government set out their first Budget in fourteen years, with detailed spending plans for the financial year 2025/26.

The two themes that emerged from the Budget could have been predicted by most clear-eyed commentators; increasing taxes to balance day-to-day spending and increasing investment to drive economic growth (underpinned by a new investment accounting approach, and five-year capital budgets). This combination has both benefits and drawbacks for the built environment sector.

First of all, government has committed significant funding to repair, upgrade and expand public buildings, with a particular focus on replacing buildings with Reinforced Autoclaved Aerated Concrete (RAAC), which is now reaching the end of its sale lifespan. This includes providing £1.4 billion for the schools' estate, £1 billion for hospital repairs, and £2.3 billion (over two years) for the prisons' estate. Continuing the focus on ensuring buildings are safe and functional, the Budget commits £1 billion for cladding remediation. These investments are urgently needed, and while further funding may be required in due course, the government is setting a clear direction of travel when it comes to investment in the public sector estate. CIAT continues to advocate for fair procurement processes which offer Chartered Architectural Technologists and other building design professionals equal opportunities to bid for such contracts.

Turning to house building, the Labour Party has pledged to deliver 1.5 million homes over the parliament, and this budget includes investment to help scale up this activity. Key commitments include £500 million of additional funding for the Affordable Homes Plan , and £3 billion of support for SME house builders, which have been in sharp decline over the last several decades. In addition, funding for local authority social housing is being increased, with councils now set to keep 100% of receipts from right to buy sales, and a significant decrease in the right to buy discount. Government also announced funding for targeted programmes, including 2,000 homes to be delivered as part of a £56 million development of Liverpool Central Docks, £25 million for a nationwide programme of 3,000 energy efficient affordable homes, and £47 million of funding to support the delivery of up to 28,000 homes that would otherwise be stalled due to nutrient neutrality in affected catchments.

The government have also announced investment in the UK's existing housing stock. £3.4 billion will released to retrofit 350,000 homes over a three-year period (equating to just under £10,000 per home), with additional funding for the boiler upgrade scheme and support for heat-pump manufacturing. A further £1 billion is to be invested in public sector decarbonisation over the next three years, and £2.4 billion committed to flood resilience.

While these are clearly welcome commitments, which signal a positive direction of travel, far more investment is likely to be needed over the coming years, with 2025’s Comprehensive Spending Review likely to prove a key milestone. Existing schools and hospitals will continue to need upgrading. There are around some 10 million cold, damp and energy inefficient homes across the UK, so retrofit activity will need to ramp up dramatically, to ensure that UK homes are fit for a healthy, net zero future. And the government must continue to advance standards of quality and sustainability in all new homes, rather than just funding individual small programmes as “proofs of concept”. 

This activity also places new demands on the built environment sector, which is already facing significant workforce and capacity challenges. Government’s announcement of £300 million additional funding for further education is therefore welcome, but it will be essential that this supports the green building design and construction jobs of the future. Similarly, hiring 300 new planning officers with £46 million of funding, and investing £40 million to transform the apprenticeships levy into a growth and skills levy are positive steps, but both will take time to bear fruit.  

Turning to the wider business environment, trade-offs are once again clear. Perhaps the most significant measure in the budget is a dramatic increase in employer National Insurance Contributions, with the threshold for payment lowered from £9,100 to just £5,000, and a 1.2% increase in the contribution rate. For many SMEs, this will be offset by an increase in the Employment Allowance from £5,000 to £10,500 and by removing the £100,000 threshold, government estimates that this will mean 865,000 employers will pay no NICs next year. Nonetheless, in combination with increases in the national minimum wage, this will increase pressure on profit margins for some employers.  

However, there are also improvements to the wider business environment which aim to drive productivity growth. Government is investing £4 million in a pilot project to support SMEs to adopt new technology, and the £1 million annual investment allowance for businesses will be maintained, as will the small profits corporation tax rate. Perhaps most significantly for businesses in the built environment sector, government has announced that, from October 2025, companies bidding for government contracts over £5 million per annum will be excluded from the procurement process if they do not pay their own suppliers within an average of 45 days. 

While some of these changes (such as the increase in employer National Insurance contributions) will operate at a UK level, most of the investment decisions related to housing and public services such as health and education are devolved to national governments, who may take different approaches. The significant tax and spending decisions for England are reflected in increased national funding grants (determined through the “Barnett formula”). The Scottish Government will receive £3.4 billion of additional funding, with £1.7 billion for the Welsh Government and £1.5 billion ofr the Northern Ireland Executive.   

All told, this is a budget which delivers the beginnings of significant investments in the built environment, and which should support small businesses to make the most of this investment. CIAT will continue to engage with the government, to ensure that the skills and expertise of Chartered Architectural Technologists are fully utilised as we deliver a built environment which is fit for the future. 

If you have any questions regarding the budget and CIAT’s work to influence government, please email [email protected].