Labour’s tax policies are hitting the companies they need to build homes
Construction plant-hire companies are fundamental to delivering the government’s pledge to build 1.5m homes, but they tend to be family businesses – the very kind that are being worst hit by changes to NICs and Business Property Relief, says Steven Mulholland
The latest Homes England figures might look promising – more homes completed, more sites started, and more land unlocked. But when you compare that with the latest S&P Global UK Construction data, which shows what’s happening now rather than year-on-year trends, output has fallen for a fourth successive month. That’s not a short-term dip – it’s a sign the industry is moving in the wrong direction.
As the Government urges firms to fulfill their pledge to build 1.5 million new homes, the reality of actually constructing these homes has become increasingly challenging. The issue isn’t a lack of ambition or effort within the sector; rather, it stems from ill-advised government policies. Rising costs and specific policy decisions by the Chancellor are hindering the sector, making planning, investment, and, most importantly, building much more difficult.
Family-run businesses are at the heart of the construction industry. They make up 95 per cent of the Construction Plant-hire Association’s members and are an integral part of the wider construction supply chain.
SMEs are least equipped to deal with tax rises
These firms are key to hitting Labour’s housing target – but they’re also the least equipped to absorb the government-induced costs hitting the sector.
The recent rise in National Insurance contributions – from 13.8 per cent to 15 per cent – along with a lower threshold at which employers begin paying, is a prime example. It’s now more expensive to take on and keep staff at a time when labour shortages are already biting.
Unlike publicly listed or private equity-backed bigger players, small and medium sized firms who make up the vast majority of the supply chain, don’t have the cash reserves to absorb this impact. We’re already seeing how the National Insurance hike is impacting businesses, with a recent Reed survey finding that a quarter of London SMEs are already making redundancies to cope.
When it comes to construction, that’s not just a business challenge – it’s a delivery problem. The Home Builders Federation says around 30,000 new recruits are needed for every 10,000 homes we build. However, with the cost of staff increasing, finding and keeping workers only gets tougher, worsening the ongoing labour shortages.
Then there are the looming changes to Business Property Relief. For decades, it’s helped family-owned construction and plant-hire firms pass on their businesses without being hit with unaffordable tax bills. Remember, these businesses are already paying their fair share of tax, contributing to the economy’s growth, why jeopardise that with a tax that may threaten their very existence. Many will now face a hard choice: saddle themselves with debt to cover inheritance tax, or sell up.
For Construction Plant-hire companies, the bulk of their value lies in assets such as equipment and premises, rather than cash. Few, if any, family-run businesses would be able to raise the necessary funds, leaving them forced to close or sell just to cover tax liabilities.
There’s also a serious competitiveness issue. Family-run British businesses – many of which reinvest profits locally – are being hit hardest, while listed companies, private equity firms, and foreign-owned enterprises continue to benefit from their tax exemptions. That creates a two-tier market: one where local firms are fighting to stay afloat, and another where scale and tax arbitrage win out.
Family-run British businesses – many of which reinvest profits locally – are being hit hardest, while listed companies, private equity firms, and foreign-owned enterprises continue to benefit from their tax exemptions
The consequences aren’t just felt on company balance sheets – they’re visible on the ground. Delays in hiring mean projects stall. Equipment left idle means less productivity. Skilled workers leave the sector for more predictable work. And communities are left waiting longer for the homes, schools, and infrastructure they’ve been promised.
A recent survey by Family Business UK shows just how serious this is, finding that 12 per cent of family-owned firms are already considering selling up because of Business Property Relief changes.
At a time when long-term investment is needed more than ever, these policies are pushing confidence in the opposite direction. If Labour is serious about delivering its housing pledge, it needs to step back and look at the bigger picture.
There’s a strange stigma in politics around changing your mind, as if correcting course is a sign of weakness. But in business, recognising when something isn’t working and acting fast is seen as good leadership. The same should apply in government. If ministers are willing to reconsider policies that are damaging small firms and stalling housebuilding, the industry won’t criticise them for it. We’ll thank them for listening.
By Steven Mulholland is CEO of the Construction Plant-hire Association (CPA)