Despite the medium and long term declines in public spending announced in the 2009 PBR, the construction industry will hope, perhaps above all, for certainty with regard to major infrastructure projects. The Government may yet commit itself to further infrastructure works in 2010, under guidance from its newly appointed advisory body, Infrastructure UK.

However, given the size and length of time it takes to plan for, design and carry out infrastructure projects (and the delays that can affect them) it was interesting that the Chancellor used London's Blackfriars station and Birmingham's New Street station as examples of projects that were now on site. The industry has seen proposals for New Street station come and go and, while the works at Blackfriars are very real, the upgrade of the entire Thameslink line was called "Thameslink 2000" because it was originally intended to complete at the turn of the century.

Table 2.4 of the 2009 PBR includes figures for net public sector investment in future financial years:

While net investment does not equate to central government spending on construction, clearly a proportion of each year's "net investment" feeds into the construction sector. As such, these figures suggest that, to an even greater extent than was the case at the time of the Chancellor's 2009 Budget, the 2009 PBR is feeding money into the construction sector. (Nearly £6 billion more net investment than was expected at the time of the 2009 budget.)

When the current levels of net investment reduce, in the financial years 2010-2014, the industry will need new sources of work to maintain current workloads. The projections for net investment of £22 billion in 2013-14 are less than half those of the last financial year (2008-9: £45.3 billion), and this financial year (2009-10: £49.5 billion).

Commentators suggest that the public sector accounts for about 40% of total construction output in 2009, compared to about 30% in 2007.

The industry needs to plan now for large reductions in capital investment by central government in the coming years, regardless of which party wins the next general election.

As well as the low carbon aspects of the Government's announcements on infrastructure (see note, Infrastructure), the 2009 PBR focused on the low carbon economy. This builds on recent developments in the construction and engineering sector, including:

The low carbon economy announcements include:

For more information, see Legal update, 2009 Pre-Budget Report: environmental announcements.

Despite the perhaps well-founded belief in the construction sector that the Government could have done more for industry in the 2009 PBR, "green infrastructure", cleaner energy generation technologies, and the changes in existing systems (such as adapting the electricity grid to take account of offshore wind power) will all create work for construction and engineering companies.

The construction and engineering sector, both contractors and professional consultants, will hope that the Government's policies are successful in promoting and establishing the UK as a centre for low carbon technologies, so that the UK's expertise may be exported, as well as used at home.

In the 2009 PBR, the Government announced that £200 million will be made available to improve energy efficiency and tackle fuel poverty by:

All of this spending may assist the construction industry, but the size of the schemes announced is very limited.

For example, commentators estimate of the number of inefficient boilers (depending on how you assess whether a boiler should be replaced) is between about 4 and 5 million units in the UK. The Government's proposal, to be introduced in 2010, is limited to 125,000 properties and exactly how those properties may be identified remains to be seen.

The Government announced that a summary of responses to the consultation on false self-employment in the construction industry will be published in 2010. For more information on the consultation, see Legal update, Consultation on false self-employment in the construction industry.

While it is difficult to strike an appropriate tone, at times, when objecting to a proposal that intends to reduce false self-employment in the construction industry, various industry bodies have lobbied the Government to suggest that the costs to industry of following the new proposals were too high to bear in this recession.

The industry must tackle false self-employment, to ensure a level playing field between employees and the genuinely self-employed and to realise potential advantages in, for example, health and safety performance when using employees, where appropriate. On balance, it seems that the Government plans are moving slowly, but important changes remain likely in future.

The 2009 PBR confirms that the standard rate of VAT will revert to 17.5% on 1 January 2010. (The 2008 Pre-Budget Report announced a temporary reduction in the standard rate of VAT from 17.5% to 15%. This measure was to last until 31 December 2009 (see Legal update, 2008 Pre-Budget Report - implications for Property: Temporary reduction in VAT standard rate).) For more information on dealing with the VAT increase, see Practice note, How to deal with the VAT rate increase on 1 January 2010

There had been calls for an extension of the VAT reduction period. However, in the current economic climate and in light of the decision to return the standard rate of VAT to 17.5%, there was perhaps no realistic prospect of the Government introducing a reduced rate of VAT for domestic repair and maintenance work. Despite this, some campaigners will remain disappointed that their efforts, over many years, to address this issue have, once again, come to nothing.

(For more information on the power of the Government to introduce a VAT reduction measure, see Legal update, VAT Directive allows permanent reduced VAT rates for certain services.)

The Government confirmed, as expected, that the Trade Credit Insurance Scheme will close to new members at the end of December 2009. For more information on the Trade Credit Insurance Scheme, see Legal update, Trade credit insurance scheme extended.

Although the financial markets have improved, the number of construction insolvencies, and the restrictions on bank finance generally, mean that it will be expensive for the industry to obtain trade insurance. Combined with the increase in the rate of VAT, this may cause cash-flow issues for some firms.