Autumn Budget turns the screw on UK construction

IN Brief

• Autumn Budget raises tax and wage costs while offering limited direct support for construction.

• SMEs and manufacturers are pushed toward efficiencies through advanced materials, apprenticeships, and digital planning tools.

• Over the next 12–18 months, tenders, hiring, and capex will show whether self-help can offset mounting policy headwinds.

The Autumn Budget 2025 arrived with familiar rhetoric about “getting Britain building,” a handful of headline-friendly wins on infrastructure and apprenticeships, and a dense package of tax changes that mostly move in the opposite direction.

Additional capital for the Lower Thames Crossing, free training for under-25 apprentices in SMEs, and a commitment to existing infrastructure and housing investment all sit in the small “plus” column. Against them, the freeze in employer National Insurance thresholds, National Insurance on salary-sacrifice pensions, higher dividend taxation, and reduced capital allowances form a much heavier “minus” for a sector built on labour and capex.

Dr David Crosthwaite, chief economist at the Building Cost Information Service (BCIS), is frank in his assessment: “There’s little in this Budget for the construction sector.” His concern is not that there are no positives, but that ministers are once again confusing announcements with outcomes in a market already dealing with “slow demand and a shrinking workforce.”

Crosthwaite’s starting point is that the Chancellor’s celebration of a planning overhaul to “get Britain building” is badly misaligned with the numbers. Construction output and housebuilding data do not suggest a sector on the verge of a boom; they point to fragility, stalled schemes, and investors sitting on their hands.

The Budget’s treatment of employer National Insurance underlines the problem. The threshold freeze from 2028–29 and the move to charge NICs on salary-sacrifice pension contributions both increase the cost of employing staff, precisely at the point ministers are claiming to prioritise private investment as “the lifeblood of economic growth.” Crosthwaite asks, not for the first time, “Will this government ever learn from the unintended consequences of its policies?”

His warning is straightforward: raise the cost of doing business and you raise prices. “Increasing the cost of doing business is likely to be inflationary,” he says, with higher costs “inevitably” being passed on through tender prices and cutting firms’ ability to hire. “This could pile on more friction at a time when construction activity is already fragile.”

For a sector already juggling thin margins, pipeline uncertainty, and rising finance costs, the Budget feels less like a stimulus and more like an extra layer of grit in the gears.

If Crosthwaite sees the Budget as structurally unhelpful, Robbie Blackhurst, built environment expert and founder of Black Capital Group, goes further. “This is not a pro-business Budget – far from it,” he says. “While SMEs are crying out for support, the Government has delivered a £26bn tax raid that will raise operating costs, suppress investment and directly hit the very entrepreneurs driving the UK economy.”

Blackhurst acknowledges short-term relief where it exists — the fuel duty freeze and some devolved funding that may improve policy stability over time — but argues that “these measures are dwarfed by the scale of the tax rises elsewhere.” His main target is the stealthier end of the package: “Freezing employer NIC thresholds is a stealth tax on jobs. Taxing salary-sacrifice pensions punishes retention. Higher dividend taxation actively discourages entrepreneurship. Cutting capital allowances will stall investment across construction and other capital-intensive sectors.”

“For SMEs – the backbone of the economy – this Budget isn’t just unhelpful. It is actively damaging,” he concludes. In practice, that means deferred investment in plant, postponed expansion plans, and a fresh round of value engineering as businesses try to hold bid prices while the tax take quietly rises.

The National Living Wage rise and above-inflation uplift for younger workers were trailed as flagship measures to support lower earners. In construction, they land in a far messier context. Crosthwaite argues that “the above-inflation rise in the minimum wage for young people is also not as shiny as it sounds,” because it “assumes that economic conditions are conducive for businesses to increase recruitment.” Right now, he says, “that’s not currently the case, as evidenced by the high unemployment rate.”

For employers already paying well above the statutory floor, the numbers still bite. Will Hunnam, Managing Director at Forza Doors, the UK’s leading manufacturer of bespoke timber fire doors and joinery, notes that his company has “always paid above both the National Minimum Wage and the Real Living Wage because attracting and retaining the best talent underpins the quality and service our customers rely on.” Even so, “a 4.1% minimum wage rise – above current inflation – adds further cost pressure at a time when many inputs are still increasing. This impacts margins and forces difficult decisions around what we absorb and what must be passed on.”

The changes to salary-sacrifice pensions add another twist. Hunnam describes them as “a particular concern,” with employer National Insurance being applied above £2,000 per employee as “a new, hidden cost – around 15p for every £1 contributed – which could amount to more than £100,000 a year for us.” That, he points out, is “investment that could otherwise support new roles, product development or further growth in West Sussex.”

There is at least one clear positive in his view: “On the flip side, the expansion of apprenticeships is a genuine positive and supports our long-term skills plan.” Ultimately, though, Hunnam sees the onus shifting back onto management teams: “We’ll focus on what we can control: growing our market share, innovating and delivering outstanding service for our customers.”

The Budget, in that reading, sets the parameters and sends the bill, leaving construction manufacturers to improvise around the edges.

While the industry’s tax accountants pick apart thresholds and allowances, manufacturers and suppliers are already looking at more immediate levers. For Ben Bland, Commercial Manager at LKAB Minerals, the obvious place to start is the material palette and how that shapes programme risk.

“Further support for the construction industry from the UK Government would be welcome,” he says, “but it is within the power of architects and contractors to find efficiencies on projects and subsequently cut costs.” One option he highlights is “next generation building materials, such as flowing floor screeds that are cement-free, require a lower quantity of material for the same performance and can dry faster.”

According to Bland, these solutions “contribute to lower labour and materials costs, and reduce the risk of overrunning projects that can incur further financial penalties.”

Bland’s point is that “seemingly small steps taken by the industry in a challenging economic and policy environment can bring about significant efficiency gains.” In a Budget that raises the cost of capital and labour while preaching productivity, the practical route to survival runs through product choices, buildability, and how much waste can be designed out before a shovel hits the ground.

The Chancellor’s insistence that planning reform will unlock growth lands awkwardly with those trying to deliver major programmes under current rules.

Aneela Nasim, Infrastructure, Energy & Materials Industry Director, Northern Europe at Dassault Systèmes, does not sugarcoat the starting point. “We can’t deny the UK is a very expensive place to launch large-scale infrastructure projects,” she says, “and we need to find ways to reduce the costs associated with planning and quality control that can lead to project paralysis.”

In her view, “the UK can spend so much time on planning that there’s no budget left for execution,” a situation that is “frustrating for the experts involved in developing the blueprints, and difficult to justify to taxpayers who are trying to do more with less.”

Nasim is clear that safety is non-negotiable — “we shouldn’t be compromising on keeping the public safe; everyone still remembers the backlash the ‘wobbly’ Millennium Bridge got when it first opened” — but sees technology as the missing piece. The answer, she argues, is to “embrace technology solutions that improve collaboration, allow teams to model and test out hypotheses before getting into production, and speed up execution.”

Her frustration is palpable and, frankly, understandable. Dassault Systèmes’ modelling and simulation tools were used “to build a hospital in Wuhan to contain COVID in 14 days,” and “the same solutions are used by NASA to optimise all its ground operations and the International Space Station.” There is, she says, “no reason we can’t use the same tools to develop and make those large-scale infrastructure projects a reality much faster.”

For Nasim, the Budget’s real test is whether the UK is prepared “to compete with other global powers when it comes to clean energy, city infrastructure and transport.” That “starts with providing the tools and upskilling our homegrown engineers, city planners and developers.

“The UK has a history of innovation and experimentation. It’s high time we reclaim those roots and show the world we can deliver on big modernisation projects at pace.”

Strip away the set-piece lines and the Autumn Budget 2025 leaves the construction sector with more pressure than support. A few targeted wins on apprenticeships, devolved funding, and specific infrastructure schemes are outweighed by stealth taxes on jobs, higher payroll costs, and weaker incentives to invest.

From Crosthwaite’s macro view of unintended consequences to Blackhurst’s characterisation of “a £26bn tax raid,” the consensus from economists and SME leaders is that this Budget talks up growth while making it more expensive to deliver. On the ground, manufacturers such as Forza Doors and materials suppliers like LKAB Minerals are already adjusting — raising their focus on efficiency, product innovation, and controlled risk rather than waiting for policy to rescue margins.

Whether the sector can offset the Budget’s headwinds will show up quickly enough in tender returns, hiring plans, and capex over the next 12–18 months. If the numbers do not move in the way the Chancellor expects, the question will not be why Britain is not building, but why government keeps making it harder for those who still are.

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