Cold comfort for construction sector

It has never been more critical for the Government to recognise the value of the British construction industry and how it can be deployed to re-energise the UK economy – says the Get Britain Building (GBB) campaign – as the latest research published by the Construction Trade Survey (CTS) reveals the recession in the sector showing no signs of abating. The CTS survey is reinforced by December figures from the Construction Purchasing Managers’ Index (CPMI).

The CTS shows that all areas of the industry contracted during the last quarter of 2009; and prospects in most areas of the industry remain relatively bleak in the near term with orders and enquiries falling for civil engineering contractors, building contractors and specialist contractors. In addition, sales of construction products are also anticipated to fall significantly.

The CPMI for December was still showing a contraction in activity; signifying 22 continuous months of construction sector recession.

“One wonders”, says Chris Pateman, GBB spokesperson and Managing Director of Builders Merchants Federation, “when the penny is going to drop that, instead of shoring up overseas car makers, for instance, urgent steps need to be taken to support a sector that represents 9% of GDP and employs approximately 7,000,000 people.”

“It’s a mystery that the UK motor industry warrants special treatment – largely favouring overseas manufacturers – when it only accounts for 0.8% of GDP”, continues Pateman.

Central to the GBB campaign is the proposal that the Government cuts VAT to 5% on domestic works that include an element of ‘consequential improvements’ which deliver sustainability benefits. Such an initiative  would not only generate activity in the domestic RMI environment, it would serve to improve the property asset base of the UK and assist the Government in meeting its challenging 2020 and 2050 carbon reduction commitments.

The campaign also believes that not only would the VAT reduction measure be, at least, cost-neutral but also revenue-positive through the increased activity and by bringing more contractors into the formal economy. It is currently undertaking in-depth costing research to reinforce this contention.

November 2009’s CTS certainly made for grim reading with 60% of building contractors reporting that, on balance, output fell during the last quarter in the industrial sector and 50% similarly reporting a fall in the commercial sector during the same period; compared to this time in 2008. Furthermore, 65% of civil engineering contractors also stated that workloads had fallen compared to a year ago.

In that context, 86% of heavy side manufacturers found that sales fell significantly and 75% of light side manufacturers reported that sales, on balance, fell in the third quarter compared to a year ago. Unsurprisingly then, the CTS also reports that over 10% of employment with the construction product manufacturing industry has already been lost.

Pateman concludes: “Government must start to think differently if we are to work and earn our way out of the current crisis. The UK construction industry is well set to be the motor of economic recovery, yet Government seems oblivious to the wealth creation opportunities it provides.

“Strategic investment in infrastructure – such as realising the green potential of existing UK housing stock – is just one way we can drag ourselves up by our bootstraps, and one which can only benefit the Treasury from the get-go”.

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