1. CIC Economics and Policy Forum The 2012 Budget and Construction Simon Rawlinson | March 2012

2. 30 March 2011 | = £100 million Source: HM Treasury = £50 million Budget 2012 – Unit of Comparison

3. 30 March 2011 | Plan for Growth Agenda Supply-side constraint Market failure Increasing the competitiveness of the tax system Transport and Energy Infrastructure Low carbon infrastructure Industrial capacity Commercial space Research and development Infrastructure Housing Cost of delivery of infrastructure Funding Training and career development Ease of engagement Planning and regulation Competitiveness and certainty of business taxation Simplicity of operation Support for investment and operation

4. 30 March 2011 | Source: HM Treasury

5. 30 March 2011 | Contents ■Key themes ■Macro-economic background ■Key measures ■Impact on sectors ■Plan for growth and the place for construction ■Joining up the dots

6. 30 March 2011 | Macro-economic background – GDP Growth Forecast June ‘10 Nov ‘10Mar‘11 2011 GDP growth2.62.32.11.70.8 2.9 2013/14 2.82.92.51.7GDP growth 2015/162014/152012/132011/12 FY 2.0 2013/14 3.02.70.8 GDP growth 2015/162014/1520122011 Year 2011 forecast 2011 to 2015 = 13.5% 2012 forecast 2011 to 2015 = 9.6%

7. 30 March 2011 | Macro-economic background – fiscal consolidation

8. 30 March 2011 | Macro-economic background - rebalancing Higher Investment Less net trade Deeper cuts in Gov’t consumption More private consumption

9. 30 March 2011 | Macro-economic background – output gap Source: NIESR Source: BoE

10. 30 March 2011 | National Infrastructure Plan ■Infrastructure funding –60% to be privately funded – no constraint, but new models of finance needed –20% funded via a PPP model –2/3rds cost picked up by service users through charges ■Enabling measures – attracting investment –Planning Policy Framework –Electricity Market Reform –Major Infrastructure Planning Unit –Green Investment Bank –Business tax reform £250bn of new projects £26bn investment announced in November 2011

11. 30 March 2011 | Key Budget Measures – supply side efficiency ■Key measures – encouraging investment –National Loan Guarantee Scheme –R&D tax credits –Enterprise zones – some with 100% capital allowances –Employee ownership –Simplified regulation Red Tape Challenge results - £3.3bn compliance cost reduction Contaminated land guidance - £140m per year –Simplified taxation ■Key measures – increasing capacity –Planning Policy Framework –Pension fund infrastructure model – including project funding –Roads funding model – based on successful utilities models –Super connected broadband – 10 second tier hubs –Additional rail investment - £130m to expand Northern Hub –Aviation review

12. 30 March 2011 | Key Budget Measures – small business investment ■Cashflow-based taxation for small business below the VAT threshold –Affects 3million enterprises –Revenues up to £77,000 ■Small business employment incentive ■Simplified business regulation –Environmental regulation - £1bn pa –Simplified HSE arrangements for SMEs –Reduced producer responsibility for SMEs

13. 30 March 2011 | Key Budget Measures – capital investment announcements ■£150m - Get Britain Building ■£130m – Manchester Rail Hub ■£270m – Growing Places Fund ■£115m – Armed Forces Accommodation ■£60m – Aerospace Innovation Centre ■£100m – University Research Facilities ■£50m – Second Wave Super-fast Broadband ■£150m – Tax Incremental Funded projects £20bn – National Loans Guarantee Scheme Assured low cost borrowing £700m – Business Finance Partnership £1.2bn in total £100m via unconventional channels £1.2bn – Local Authority earn-back model £2bn – pension investment vehicle X 20 X 480

14. 30 March 2011 | Impact on Sectors Housing and Regeneration. New Buy – 100,000 homes Stamp Duty Land Tax Get Britain Building - £150m Social Housing REITs Accelerated release of Gov’t Land Education and R&D £100m for R&D facilities £60m Aerodynamics Centre Normalisation of VAT for public and private universities Local Government TIF arrangements for all LA’s - £150m funding LA earn-back model - £1.2bn – six cities to follow 5 new EZs with 100% capital allowances Transport Pension Infrastructure Platform Ownership and financing for National Road Network A14 proposals - Summer 2012 £130m Northern Hub, £56m Bexhill to Hastings Energy and Carbon Change “Unlocking” of 4GW of energy projects – radar interference CFT exemption for gas-fired CHP Gas generation strategy Autumn 2012 CRC reform

15. 30 March 2011 | Key Budget Measures – devil in the detail? ■Impact of the replacement CRC tax ■Cost of the Carbon Price Floor - £1.6bn pa from 2016 ■Growing Places funding – sourced from Departmental Savings ■VAT equalisation for repairs to listed buildings ■Capping of the total value of tax reliefs ■VAT equalisation for providers of university education

16. 30 March 2011 | Overall impact on construction markets? ? ? ? Source: CPA 201020112012201320142015 Housing - Public54.02.0-20.0-6.0-2.03.0 Housing - Private17.36.02.06.07.08.0 Public non-housing31.4-3.3-23.5-12.6-9.20.0 Infrastructure25.79.71.62.48.36.3 Industrial19.6-8.12.35.44.53.0 Commercial-1.80.0-5.20.45.84.8 Total new work12.10.8-7.5-1.33.84.4

17. 30 March 2011 | Joining it all up ■Headline measures will have a limited impact on the industry ■Capital investment driven by the private sector – some progress here ■Progress on many key supply side initiatives ■Impact of regulatory reform will be felt from now on ■The 2011 budget is fiscally neutral but supportive of business ■Limited positives for construction – as part of a wider solution

18. CIC Economics and Policy Forum The 2012 Budget and Construction Simon Rawlinson | March 2012