Yesterday in the UK, the Chancellor of the Exchequer unveiled a range of changes to governmental departments as part of her Spending Review. Our sector leads have shared their reactions to the updated financial outlook.
The Chancellor’s Spending Review outlined the government’s departmental priorities for the remainder of this parliament, with implications for various sectors across the construction industry.
While some departments face a decrease in day-to-day spending over the period, Rachel Reeves included tens of billions in new investment for capital expenditure across affordable housing and major infrastructure projects.
The government announced a £16.7 billion commitment to nuclear power initiatives, with the Chancellor approving £14.2 billion to construct the new Sizewell C nuclear plant in Suffolk, which we’re pleased to be supporting. This investment will be vital for the country achieving low-carbon electricity and reducing dependency on fossil fuels.
Meanwhile, almost doubling the previous government’s funding towards affordable and social housing to £39 billion over the next 10 years will improve project viability, and give developers confidence that this government is committed to addressing the persistent issue of housing shortages.
As the Chancellor looks to "renew Britain" with the highest sustained public sector investment rate for decades, the construction industry can support projects across various sectors with a greater degree of certainty following this review.
At Gleeds, we are closely involved with many projects and programmes across those sectors mentioned in the statement, and look forward to partnering with our clients to deliver those projects and create positive outcomes for the communities that surround them.
Various funding packages unveiled by the Chancellor should go some way to improving connectivity across the nation and boosting local economies.
Notably, £15.6 billion is being invested in city regions via the Transport for City Regions settlements – boosting the provision of zero emission buses and the extension of tram networks. Additionally, announcements of confirmation of funding for the Transpennine Route Upgrade and progression of the delivery of East West Rail will be well-received across the industry.
New stations are planned following the Burns Review, while a combination of direct funding and cash for the Welsh government will also be spent on fixing level crossings and upgrading existing lines.
The Department for Environment, Food and Rural Affairs, and ultimately communities, will benefit from a focus on climate resilience and adaptation infrastructure, with the Chancellor committing £4.2 billion from 2026-27 to 2028-29 to build and maintain flood defences.
Meanwhile, Transport for London (TfL) will benefit from a significant £2.2 billion of funding between 2026-27 and 2029-30 for its capital renewals programme. The government also recognises the potential growth and housing benefits of the Docklands Light Railway (DLR) Thamesmead extension and outlined its commitment to working with TfL to explore options for delivery.
All eyes for those working in the sector will be on the long-term infrastructure plan due to be released this month, which will be accompanied by further announcements of specific projects.
It’s positive to see that the Spending Review includes £244 million set aside to complete the development of new government hubs. With the downsizing of the civil service in London, these initiatives are set to transform local economies in Darlington, Manchester and York, where over 6,000 civil servants will be relocated.
Gleeds is working closely in supporting several central government departments as they look to reshape their estates, and it was encouraging to hear the Chancellor reaffirm these commitments with a funding boost.
More broadly across the public sector, investment into the health and education sectors is good news, but more needs to be done to ensure that the construction industry can properly support the NHS and Department for Education in addressing the challenges they face.
Naturally, it’s great to see funding going into the NHS, digitising the estate and providing increased capacity in primary care.
Alarmingly, there was little to address the lack of capital funding in the system beyond the new build programme. NHS backlog maintenance requirements are at critical levels, with many Trusts facing resilience issues, this is a real cause for concern with no clear solution forthcoming from the government.
Continuing to ignore the NHS backlog for longer only increases the scale of the challenge that healthcare providers face. The government needs to focus on supporting Trusts to streamline decisions and efficiently manage their estates, as well as setting aside appropriate funding for modernising ageing hospital estate.
Equality of healthcare provision has been widely discussed over the last week in within the healthcare sector. Funding for, and the delivery of adult social care through local authorities, continues to constrain the sector.
As an industry, we’re poised to support with solving this problem, but there needs to be a greater financial emphasis from the government on dealing with capital reform and alternative funding models.
Much needed funding for housebuilding took centre stage in the Chancellor’s Spending Review announcement.
From the direct interventions of funding support for councils and Registered Providers, the commitment to warmer homes, continued support for brownfield regeneration, attacking homelessness and improving living standards for our military personnel, the Spending Review provides a broad selection of opportunities to make improvement of homes deliverable.
The private sector alone cannot solve the housing crisis and this intervention by government is appropriate and critically needed to renew living standards and growth in the UK.£39 billion over the next 10 years will go towards the Affordable Homes Programme. At £3.9 billion a year – the funding almost doubles the previous government’s £2.3 billion annual commitment, with allocations covering a mix of new housing and improving existing housing stock.
Homes England will manage £4.8 billion in financial transactions to unlock more homes, catalysing additional private investment to further boost house building as the government seeks to meet its 1.5 million new homes target in this parliament.
Furthermore, the longer programme – an increase on the previous five-year period – is a welcome step providing more certainty for developers and a glimmer of hope for the large numbers of people on waiting lists for affordable housing.
The locations for new housing at scale are to be addressed, but the eagerly awaited new towns strategy will no doubt provide focus beyond the missions already announced in respect of the North, Midlands and Cambridge (supported by new infrastructure spending on rail for key communication routes).
It will be interesting to see how the introduction of ’place-based business cases’ progresses – bringing together the projects needed to achieve the objectives of a particular place will impact where funding can be justified to be spent. This initiative alone will help make sure that central government properly assesses the complementarities between different projects, such as housing and transport building a coordinated vision of the shape of UK housing infrastructure for years to come.
It’s a hugely positive step that the Chancellor has set aside £14.2 billion to move forward with the Sizewell C plant in Suffolk, which is set to bring a major boost to the British economy and provide much-needed jobs and apprenticeships. We’re proud to be involved supporting the delivery of this milestone project.
Things are moving in the right direction with the commitment to £2.5 billion in funding for small modular reactors (SMRs), an additional £2.5 billion for the fusion programme and £9.4 billion for CCUS and Acorn and Viking clusters. This combination will support in the growth of the UK’s nuclear portfolio and significant industrial transformation to provide clean and secure energy.
Rolls Royce’s involvement is also positive, with one of the world’s first SMR programmes supporting 3,000 jobs in the East Midlands in the process and central to providing three million homes with clean energy, produced in the UK, and enabling the UK to explore significant export potential.
Going beyond nuclear, the government needs to continue investing in offshore wind, hydrogen and other energy sources, in order to meet our net zero targets and enhance our energy security.
Regeneration projects look set for a fresh impetus following the Chancellor’s Spending Review.
With schemes stalling due to viability issues and the loss of previous funds such as the Future High Streets Funds and Levelling Up Fund, grant funding as opposed to debt looks to be a promising step in unlocking regeneration.
Projects such as Southport Pier, Kirkaldy seafront and a new sports quarter for Peterborough were mentioned by Rachel Reeves in parliament. Funding will derive from a Growth Mission Fund totalling £240 million, which will put investment into 350 deprived communities across the UK.
If economic growth is to be driven by growth in every part of the UK, then the British Business Bank’s financial capacity increasing to £25.6 billion – offering two thirds more support – could prove to be an important step in facilitating more businesses to start up and scale up.
We await further details on the criteria for accessing the funds that can bring schemes and business plans to fruition, but for now the Chancellor’s messaging is positive and can only help boost consumer confidence.
Furthermore, the commitments outlined to housing will underpin the regeneration of many of our urban areas, with the footfall created by the residential uses also supporting a mix of uses within our regeneration projects.
It’s fantastic to see £22.6 billion per annum of investment towards the research and development sectors, putting our sectors at the forefront of the UK’s innovative future.
The government has prioritised research and development which will contribute to the success of the growth-driving sectors, and the places in which they cluster. The way in which this investment will be actually delivered through the various agencies such as UKRI will be set out in the modern Industrial Strategy soon to be published.
With funding directed at the UK’s regions, areas like Liverpool will benefit from the financial boost to its burgeoning biotech base. From a construction perspective, the extra funding and unlocking of both institutional and venture capital funding is critical to supporting both startup firms and those trying to scale up their companies, but we need a further push from the wider industry to encourage more people to pursue careers in the industry. This is the only way we’ll ensure that we have a skilled workforce that is able to deliver these much-needed facilities.
Chancellor Reeves has committed to a £4.5bn annual increase in the core schools budget by the end of the current spending review, as part of a wide-ranging investment in England’s education infrastructure.
The government has already committed to ramping up the school rebuilding programme, which was slow in its first few years. Spending this year was due to be around £1.4 billion and today’s commitment to increase this to £2.4 billion is welcomed in the schools community. Gleeds is delighted to continue our support on this major programme.
The Chancellor has also promised an additional £1.2 billion “record investment” for skills per year in Further Education by the end of this parliament – but most of it has already been announced. There are fears that with the growing numbers of Post 16 pupils the increase may not be enough.
Reforms to the SEND system will be set out in a schools white paper in the autumn and how best to tackle the rise in ECHPs and the financial burden on Local Authorities.
The £86 billion R&D funding package is a vote of confidence in the UK research sector and positive news for the University sector which is embedded in supporting the skilled workforce required for this industry. The University sector however, waits to see how wider support is provided to ensure financial stability in what remains an extremely difficult time.
The £2 billion investment into the continued development of AI, through the AI Opportunities Action Plan, is good news for the data centre sector. With data centres having been classified as critical national infrastructure last year, the increased investment in AI will directly fuel demand for advanced computing infrastructure, making the sector a vital enabler of the UK’s AI ambitions. The growth zones (mainly deindustrialised areas) will receive fast-tracked planning approvals and priority access to large electrical power allocations which have already garnered expressions of interest from some of our DC clients.
Additionally, the investment into small modular reactors will improve our energy mix in the UK, allowing the data centre sector more power accessibility supporting growth plans essential to respond to high demand.
