What will the Autumn Statement mean for Transport & Logistics?
This year’s Autumn Statement is the first to be delivered by the new Chancellor, Phillip Hammond.
Given the potential economic uncertainty arising from the unknown impact of Brexit, he is no longer seeking to balance the books by the end of the current parliament. This positioning is reinforced by the recent report by the Institute of Fiscal Studies, which predicts slower growth and higher inflation that was originally forecast, despite the unexpected 0.5% growth figure achieved in the third quarter.
“What this all means is that there is more limited scope for tax cuts, and that any spending initiatives must be carefully chosen. Mr Hammond has said that there won’t be a spending “splurge”, and that he wants to focus on “shovel ready” projects, which can deliver the quickest schemes, offering the highest economic benefits, and the greatest increases in productivity.
“In particular, Mr Hammond has signalled that any fiscal stimulus in the Autumn Statement would be concentrated on boosting Britain’s roads and railways. Good news for the transport sector. It is notable that, except for HS2 (which is increasing in predicted cost with every new announcement, and given the shift in policy may not be invulnerable from slashing or pushing back in the queue), much of the government’s spending commitments are expected to be delivered via local bodies, such as the Local Enterprise Partnerships (through the Local Growth Fund), or via the Local Transport Majors for larger projects. However, money won’t be easy to come by – the current Local Growth Fund round is over-subscribed by five times, and in last year’s Autumn Statement the Department for Transport’s operating budget was slashed by 37% – the biggest drop for any Government Department – so there’s ground to make up.
Interestingly, Mr Hammond’s focus is for his infrastructure package to boost British productivity – which is a key mantra of the Government under its new leader. The thinking is that better road and rail links should help to get people to work more quickly, while investment into the technology and science sectors (which are also being championed) are expected to help create more highly skilled and better-paid jobs.
Improving productivity is central to Theresa May’s pledge to raise living standards for British workers, because employers are more likely to raise workers’ wages if each worker is able to contribute more. There are high employment levels in the UK, but productivity is low – on average, UK workers produce 35% less per hour than their German counterparts. Economists suggest that at least part of the UK’s problem has been the growth in low-paid, low-skilled jobs in the wake of the financial crisis.
“Therefore, we can expect spending in the transport sector to be focussed on local requirements, with perhaps those who shout loudest (and, in relation to the Local Growth Fund, those who are pushing on with local devolution), getting priority. A patchwork solution seems to await.
“Despite the fanfare accompanying the announcement of the new Heathrow runway, the time lag and groundwork involved in getting this project up and running suggests that it is unlikely to feature heavily in the Autumn Statement.”