Autumn Budget: what was in it for construction?

The Autumn Budget⁽¹⁾ introduced a range of measures affecting the construction industry and wider built environment, including additional housing investment, support for energy and fuel costs and infrastructure commitments. Delivering his first Budget as Chancellor, John Healey confirmed an additional £1.5 billion for social and affordable housing, an extension of the existing fuel duty cut until July 2027 and £4.7 billion for the government’s new first-time buyer scheme, Your First Home. 

Infrastructure also featured in the announcements, with a review of rail infrastructure costs due to report next year and a new British Data Centre Covenant aimed at accelerating the delivery of strategically important projects. Under the covenant, eligible data centre developments could benefit from improved access to grid connections or permission to develop on-site power generation while awaiting connection. In return, projects will be expected to meet criteria relating to local economic benefits, energy costs and environmental standards. 

The government also confirmed that an updated 10-year Infrastructure Pipeline, setting out more than £750 billion of planned investment, will be published before the end of 2026. 

Dr David Crosthwaite, chief economist at BCIS, said: ‘The Autumn Budget offered some positive developments for construction, although it was understandably more focused on addressing immediate pressures than setting out a longer-term direction for the industry. Given the challenging economic backdrop and limited fiscal headroom, the Chancellor was always going to face difficult decisions about where to prioritise spending. 

‘The additional investment in housing, extension of the fuel duty cut and measures to support apprenticeships are all welcome. Each has the potential to ease some of the pressures facing businesses, whether through supporting demand, managing costs or helping to develop the future workforce. 

‘There were also encouraging signals on infrastructure. The commitment to update the national pipeline, alongside the data centre covenant and review of rail costs, should help provide greater visibility of future opportunities and support more efficient project delivery. 

‘However, the reduction in departmental capital budgets inevitably raises questions about how investment priorities will be balanced and which projects will move forward. The updated pipeline will therefore be particularly important in giving clients, contractors and the wider supply chain the confidence to plan and invest.’  

Key measures and their implications for construction 

Housing and home ownership 

• An additional £1.5 billion for the Social and Affordable Homes Programme to deliver around 10,000 homes. 
• £4.7 billion for the new first-time buyer scheme, Your First Home, supporting around 70,000 eligible first-time buyers with up to 20% equity loans to buy new builds.  
• No further major changes to Building Regulations in this Parliament, excluding those related to building safety.  
• Exemption from biodiversity net gain requirements for residential brownfield developments on sites up to 1.5 hectares in England.
• A one‑year extension to the preferential rate from the Public Works Loan Board, keeping loans at 40 basis points below the normal rate. The latter is intended to provide cheaper borrowing costs for councils to help them invest in homes.  
• A zero rate of VAT on land sold to registered social housing providers from 1 April 2027. 
• A First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029, keeping the £4,000 annual limit and 25% bonus, with a £450,000 price cap and no upper age limit. 

Infrastructure Pipeline and local growth  

• An updated Infrastructure Pipeline to be published by the year’s end. It will set out more than £750 billion of investment over 10 years and include an expected workforce requirement of more than 650,000 people.  
• The Defence Investment Plan is fully funded. The remaining £4.7 billion will be funded as follows: £3 billion from a 1% cut to departmental capital budgets from 2027-28 to 2029-30 and £1.7 billion from the Treasury’s capital reserve, with sales of surplus public assets also contributing. 
• A new British Data Centre Covenant to help deliver strategic data centres while supporting local communities and environmental standards.  
• A review of rail infrastructure costs to report in six months once established.
• A further £20.4 billion for the National Wealth Fund and British Business Bank over the coming years.  
• A roadmap for fiscal devolution. All business rates are to be retained locally by the end of the decade. Mayors will get 20% of business rates revenue from next year, a share of income tax from 2028 and powers for an overnight visitors’ levy from 2028.  
• Gas shipper obligation scrapped, with hydrogen projects to be funded directly by the government. 
• Main construction works on the A66 will start in November 2026. This is part of a continuous 50-mile dual carriageway between the M6 and A1(M).  
• £300 million is confirmed for the Leeds station upgrade.  
• The Public Works Loan Board lending limit is rising from £135 billion to £155 billion.  

Energy and materials  

• The temporary 5p fuel duty cut will be extended to 1 July 2027, with the HGV vehicle excise duty holiday also running to that date.  
• The tax-free mileage rate above 10,000 business miles rises from 25p to 35p. 
• Confirmed implementation of the British Industrial Competitiveness Scheme from 1 April 2027. Over 10,000 eligible manufacturers will see electricity bills reduced by up to 25% with an additional payment in 2027, reflecting the support firms would have received had the scheme started sooner. 
• Climate Change Levy main rate on electricity frozen from April 2028, alongside the removal of carbon price support. 
• A £120 million Ceramics Industry Support Scheme for energy efficiency and decarbonisation, and confirmation of the £350 million Critical Chemicals Resilience Fund. Tariff suspensions on chemicals and plastics extended. 
• New clean power only procured where it lowers bills and can connect to the grid.  

Retrofit  

• £1 billion of Warm Homes Plan capital grant will be cut as part of the energy department’s contribution to the Defence Investment Plan. The government states most funding for low-income households and social housing, delivered by mayors and councils, will be protected. 
• Warm Homes Fund financial transactions reallocated to fund Your First Home. 
• Boiler Upgrade Scheme kept at £400 million in 2027-28, rising broadly with inflation, and a Warm Homes Loan Scheme launched for heat pumps and clean technologies. 

Employment and skills  

• An increase in the National Living and Minimum Wage rates by 3.9% from April 2027. Around 2.3 million workers are due to benefit.  
• No change announced to tax on employment income or to employer National Insurance contributions. 
• A requirement of at least 3% apprenticeships on large government infrastructure and construction projects.  
• £100 million over two years to expand local apprenticeship services, matching young people with local employers. 
• Capital allowances: the main writing-down allowance falls from 14% to 12% and the first-year allowance rises from 40% to 50%. These affect plant investment.

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^{(1) HM Treasury – Budget 2026 – here.}