Construction Sector Divided Over 2025 Budget

The construction industry has offered a mixed but largely wary response to the 2025 Budget, with many leaders suggesting that the measures announced fall short of the stability and long-term direction the sector needs. Although the Chancellor emphasised prudence and targeted intervention, businesses across trades, housebuilding, planning and infrastructure argue that the Budget offers only partial solutions to increasingly complex pressures.

There was already unease ahead of the announcement. Robin Clevett of FIX Radio warned beforehand that tradespeople are facing a “triple whammy of higher National Insurance, higher wages and rising business costs”, adding that rising NI means “an apprentice not hired, a van not replaced or a pay rise delayed”. His concern that higher operating costs make it harder for trades to invest and retain staff set the tone for wider industry reaction. Many of his fears were reflected in the final Budget, particularly the sense that the government speaks about growth while simultaneously introducing measures that affect the very workforce expected to deliver it.

The Royal Institution of Chartered Surveyors acknowledged that the Chancellor must navigate difficult financial terrain but questioned whether some decisions may have unintended consequences. While RICS welcomed support for apprentices up to the age of 25 and ongoing efforts to reform business rates, it warned that applying National Insurance to rental income could weaken the housing market. Justin Young, Chief Executive, reflected this cautious stance, noting that although there are constructive steps on skills, “there are several measures which may weaken the housing market”, emphasising the need for the government to work closely with industry to limit disruption.

Waste management policy also received significant attention. The initial proposal to converge the two rates of Landfill Tax had alarmed housebuilders who predominantly deal with lower rated inert waste. Although the government ultimately decided against convergence, the lower rate will still increase alongside the standard rate. David Gudgeon of Reconomy Connect said it was “encouraging to see the government respond to industry concerns”, but argued that rising disposal costs underline the need for a balanced approach that supports construction at a time of tight margins. His view reflects a broader theme across the sector: environmental ambition must be aligned with financial and operational realities if sustainable practice is to scale effectively.

In the Midlands, contractors and housebuilders expressed frustration that the Budget does not deliver the confidence boost they hoped for. Stuart MacKenzie of McPhillips said the measures “have not gone far enough to restore the stability we needed”, adding that changes to salary sacrifice and minimum wage rules risk diverting focus away from investment in skills and sustainability. The expectation had been that the Budget might unlock stalled decision making and create a visible pipeline of work. Instead, many firms remain concerned that rising taxes and administrative burdens will overshadow any positive steps on planning.

Smaller housebuilders felt particularly overlooked. Sophie Horgan of Horgan Homes described the Budget as “a sticking plaster of a statement”, reflecting a belief that SMEs continue to face disproportionate challenges without targeted support. The sector is already battling labour shortages, slow planning processes and volatile materials costs, and many hoped for stronger measures to accelerate housing delivery on small sites. Similarly, in the higher end residential market, Kevin Stevens of E5 Group criticised the introduction of what he called a “mansion tax”, warning that new levies could deter investment and push out individuals who contribute significantly to economic activity.

Landlords and renters are set for further strain following the decision to raise property income tax rates by two per cent from 2027. Property Buyers Today founder Saif Derzi believes the rise may prompt some landlords to exit the market, putting pressure on rental affordability. His concern that the increase could intensify a market already marked by limited stock and high demand echoes RICS’ warning that sudden shifts in landlord taxation risk deepening instability.

There were, however, pockets of optimism. The NHS capital commitments were widely welcomed by firms specialising in modern methods of construction. Many see offsite and modular delivery as a practical route to achieving the government’s ambition for new Neighbourhood Health Centres. McAvoy’s healthcare strategy lead, Laura McCormick, said the investment “sets out a promising direction for NHS building infrastructure”, highlighting that modular solutions can cut delivery times and help address the mounting maintenance backlog. This was one area where the Budget was seen not only as financially sound but also aligned with long term strategic needs.

The planning profession responded positively too. Funding to increase planning capacity was broadly applauded, with the Royal Town Planning Institute describing the announcement as a potential turning point after years of resource decline. Dr Victoria Hills called it “a watershed moment for the English planning system”, emphasising that investment is essential to retain experienced planners and support the next generation. With one in five planners expected to leave the profession within three years, new funding was viewed as both timely and necessary.

However, commercial property and infrastructure specialists remained cautious. Peter Hogg of Arcadis reflected wider business sentiment, arguing that the Budget “talks about growth but acts against it”, particularly due to limited capital expenditure commitments and ongoing uncertainty around business rates. Although he welcomed measures aimed at improving quality of life, he questioned whether these should be implemented at the expense of policies that stimulate economic expansion.

Taken together, the industry’s verdict is that the Budget offers several constructive elements but lacks a cohesive vision that matches the scale of the UK’s housing, skills and infrastructure challenges. While apprenticeships, planning capacity and NHS construction received meaningful boosts, these positives are overshadowed for many by rising taxes, increased costs and concerns over weakened market confidence. The mood across the sector is one of cautious engagement rather than renewed optimism. Many in construction are ready to support the government’s ambitions, but they remain clear that without more decisive action, the path to genuine growth will remain uncertain.

Written by: Olivia Needham