Viewpoints
VIEWPOINTS +VOX: Reeves budget boosts factory investment but wage hikes squeeze UK glazing firms
Rachel Reeves’ second Budget since Labour took office leaves the UK’s fenestration industry weighing a familiar trade off of stronger investment support against rising operating costs and a leaner pipeline of subsidised retrofit work. Her first Autumn Budget in October 2024 set out the new government’s fiscal reset and this latest package broadly stays that course of high tax and targeted spending.
On the upside for manufacturers, the chancellor has again kept corporation tax unchanged while confirming that full expensing for qualifying plant and machinery will remain in place and introducing a new 40% first year allowance for capital investment. For systems houses, IGU lines and fabrication plants looking at robotics, cutting and machining centres or upgraded ERP and stock handling, the tax treatment materially improves the payback on automation and digitalisation projects that were parked during the recent slowdown.
Energy policy is another relative positive for the production side. From April 2026, around £150 of policy costs will be stripped from the typical household energy bill by moving most of the Renewables Obligation and the Energy Company Obligation (ECO) into general taxation, while the Treasury’s wider industrial strategy includes a commitment to “slash electricity prices for thousands of manufacturing businesses”. For glass processors, extrusion lines and tempering plants, any sustained easing in power prices would go straight to the bottom line, although the detail of how savings will flow through individual contracts remains to be seen.
For installers, the picture is noticeably harsher. The Budget confirms that ECO will end in 2026 as part of the levy shift off bills. The scheme has underwritten significant volumes of funded fabric upgrades in low income and hard to heat homes. Retrofit analysts warn that its removal will sharply reduce targeted support for energy efficiency in the leakiest parts of the UK housing stock even as headline bills fall slightly for all households. Installation companies whose order books rely heavily on ECO backed work now face a hard deadline to reposition towards directly funded domestic projects or new public sector frameworks.
The biggest new cost item for both manufacturers and installers is labour. From April 2026 the National Living Wage for workers aged 21 and over will rise by 4.1% to £12.71 an hour, with 18 to 20 year olds seeing an 8.5% increase to £10.85 and 16 to 17 year olds and apprentices moving to £8. In fabrication shops, warehouses and transport fleets and across survey, office and fitting teams labour already sits as one of the tightest cost lines. HR advisers note that higher legal minimums tend to trigger knock on increases to retain differentials for supervisors and experienced installers which can push total payroll costs up faster than headline percentages suggest.
Larger, well capitalised fabricators with the scope to automate, redesign processes or spread higher wage costs over greater volume are best placed to cope. Smaller regional installers competing on price in the retail replacement market may find it harder to avoid margin erosion without lifting quotations, chasing higher margin work or cutting overheads. Over time the combination of higher wage floors, unchanged corporation tax and generous capital allowances is likely to accelerate investment in off site manufacture, leaner scheduling and digital survey tools across the sector.
Taken together, Reeves’ second Budget offers UK window and door businesses cheaper capital and the prospect of lower energy costs but at the price of higher wage bills and a less generous retrofit regime. The net effect looks set to favour firms that can invest in productivity and pivot away from subsidy dependent demand while intensifying the squeeze on more thinly financed installers.
UK Sector Correspondent
