Inheritance tax changes threaten UK’s infrastructure push
Inheritance tax changes will wreck the UK’s construction supply chain even as ministers put major infrastructure projects at the heart of plans for economic growth, according to a prominent lobby group.
A string of schemes including five London airports and the UK’s biggest-ever road tunnel have received government backing since Labour took power, as Chancellor Rachel Reeves looks to reinvigorate the UK economy. The government is also under pressure to hit a target of building 1.5m homes by 2030.
But businesses which make up a large section of the construction supply chain have warned they are being ignored over the damage caused by changes to Business Property Relief (BPR).
“If we get to August and there’s no sign of any rolling back and reversals of these policies, then we’re going to have serious, serious issues coming down the line including businesses failing,” Steven Mulholland, chief executive of the Construction Plant-hire association, told City PM in an interview.
The government announced restrictions to the inheritance tax relief available for agricultural and business property in the Autumn Budget.
While the farming industry’s backlash was widely publicised, those in less-known sections of the construction supply chain feel their concerns have been ignored.
“This government is not interested in listening, they don’t really want to listen,” said Mulholland, whose association represents nearly 2,000 firms which provide critical machinery for the UK construction industry.
“It’s really getting frustrating. When you’re talking about thousands of job losses coming down the line, it just makes no sense.”
Around 95 per cent of the construction industry is made up of small to medium-sized businesses, much of which are family-run, asset-heavy and operate on tight margins. Capping BPR could force generational owners to sell up machinery in order to pay their tax bills.
Gap Group, the UK’s largest equipment hire company, has warned of “catastrophic issues” associated with the changes.
Founded in 1969, the firm employs 2,100 people at its 210 UK sites, with turnover of around £300m.
Managing director Mark Anderson told City PM there should be a “proper formal consultation with family business owners to avoid the unintended consequences this policy will create,” including reduced investment and lower overall tax take.
Anderson says the policy is also anti-competitive given foreign family businesses, PLCs and private equity backed firms do not have to pay the liability when management changes.
Major projects including HS2, Heathrow’s third runway and the £9bn Lower Thames Crossing could all be impacted by issues in the construction supply chain.
But Mulholland argues the impact will be worse for more general construction jobs such as railway and road maintenance, where many smaller firms operate away from the top-tier contractors.
The government has been approached for comment.