Ruth Mitchell

Member Article

Public sector cuts hit construction industry

Public sector cuts have finally begun to impact on activity on the construction industry, confirming the fears of many in the sector.

37 percent of building companies reported a contraction in growth between 2010 Q2 and 2011 Q2, while 19 percent of SME contractors reported a decline in their workload for the 14thconsecutive quarter.

These results come as no surprise to John Hardy, managing director of Portland Consulting, who attributes the problems to the complicated bureaucracy involved in procurement.

Commenting on the figures, he said: “Over the last 15 years procurement methods have created a stranglehold on the industry and therefore make it difficult for small firms to grown and create employment.

“I can see shrinkage over the coming months to a level that is dangerous and will be difficult to recover from, and Just like all the other traditional industries we had in this country, we will lose all the relevant skills and it will take years to replace them.”

Construction accounts for 10 percent of the UK’s economy, but despite government pledges to place the industry at the heart of its growth strategy, industry output is still expected to fall over the coming year.

Noble Francis, Economics Director at the Construction Products Association also blamed the banks reluctance to invest in the construction industry, and called for the government to clarify the picture on forward public investment.

He said: ’Construction activity fell in most sectors during the second quarter, with only a small rise in private commercial activity preventing even sharper falls.

“The greatest falls were seen in public non-housing such as education and health and with the public sector spending cuts already taking effect this will only exacerbate the situation.”

Responsibility for vital projects such as schools and hospitals has been devolved to local decision makers, rendering it difficult for those in the construction industry to understand the fully economic picture ahead.

This was posted in Bdaily's Members' News section by Ruth Mitchell .

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