Construction seeks Autumn boost from Osborne

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The cuts to public spending and a lack of capital investment are having an adverse effect on the growth of the UK economy, according to industry figures.

Diana Montgomery, Chief Executive of the Construction Products Association, has set out a series of measures the Chancellor could take next week’s Autumn Statement to boost construction.

Construction product manufacturers and distributors in the UK have a turnover of more than £50 billion, which accounts for 15 per cent of all manufactured goods and four per cent of GDP.

The continuing decline of the construction sector means there is a lack of new orders further down the construction supply chain.

Current indicators show that this decline will continue for at least a further 12 to18 months, while the consequences of deep cuts in public sector investment that were made several years ago now being felt.

“If you look at the prospects for building schools, affordable housing and all those sorts of projects, the numbers are really low,” Ms Montgomery told Central Lobby.

“When we look towards recovery in 2015 and beyond it is going to be infrastructure and private housing not the public sector that will drive the recovery.

“The bottom line is that the Government isn’t investing in the UK.

“It has got its big, sexy infrastructure projects, the Autumn Statement will announce loan guarantees for things like the A14 and the Thames Tideway Tunnel, and I am sure HS2 will get a mention.

“They are not nationwide; they are not delivering across the country.”

Ms Montgomery adds:

“We do have some sympathy for the Government, it is like asking someone who borrowed rather largely on their credit card and is trying to pay the interest to take a deep breath and do something a bit more constructive to pay it off.”

She says that while the current model is one George Osborne is “wedded to”, turning to shovel-ready construction projects that don’t grab headlines “would do far more good than continuing with austerity for too long”.

“Particularly for construction it becomes a self-fulfilling prophecy because if you invest in construction, almost everything that is built here is constructed with materials that are made here,” Ms Montgomery says.

“Construction has a very unusual supply chain in that you have a number of large companies through to a myriad of specialist contractors, so you really are investing across the UK.”

The CPA has written to George Osborne laying out some measures that he could take next week to boost construction.

“They really have to land the private finance model to replace PFI, and get the pension fund investment they have talked about,” Ms Montgomery says.

“It is the smaller projects that will make a difference more quickly that the big iconic projects.

"It is about roundabouts and things like that - projects that are sitting there ready to go. It can be done without breaking the fiscal rules that have been set.”

A boost in construction will also have an effect on unemployment.

“The big advantage of construction is that it is highly skilled at both ends of the supply chain, at the architect end and the construction end, but a lot of it is semi-skilled and provides good jobs and very local jobs as well.”

Ms Montgomery predicts that for all the emphasis placed on the Green Deal by ministers, energy efficiency will end up taking a back seat in the next 12 months.

“I am really frustrated - they have made a number of announcements in the Green Deal and are going to wait and see if they have an effect. I am really worried that they won’t.”

Energy Minister Greg Barker has claimed there will be improvements to 14 million homes by 2020 and a further 12 million by 2030 to make them more energy efficient.

“Even if they were only going to attempt a tenth of that, 1.4 million homes, it would make an enormous difference,” says Ms Montgomery.

“It is all very well to say wait and see but we need it to start having an impact in 2013."

The CPA has proposed using stamp duty to push the efficiency agenda.

“If the Government were to signal with clear intent that by 2015 you will see an increase in your stamp duty if your house isn’t energy efficiency then are signalling a direction in travel.”

Late payment has been a considerable issue within the construction supply chain since the financial crisis began, especially for small and medium size firms.

These firms could be assisted by the Project Bank Accounts (PBAs), which are a cost effective measure to monitor payment throughout the supply chain.

“There are challenges for the private and public sector, and some examples of very good practice in government,” says Ms Montgomery.

“We would say you have made a very good start and you need to keep your foot on the gas on that one.”

Lord Heseltine’s recent report on growth had a range of ideas, some of which may end up in Mr Osborne’s Autumn Statement.

“There are some things we would really like to see, such as long term strategic partnership between Government and business,” explains Ms Montgomery.

“It is pretty clear that Heseltine thought there was a role for chambers of commerce and opportunities where exports are concerned with helping especially medium sized companies.

“It is something other countries do a lot better. I think that message has got through to Government.”