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CSR brings some relief for construction industry

THERE was some relief for the construction industry given the Chancellor’s decision to maintain transport investment over the next four years. Public sector capital spending, which had been expected to fall by 35% over the period of the Comprehensive Spending Review (CSR), will now fall by just over 30%. As a result, the cuts to public sector construction spend are expected to be £3.5 billion less than was announced at the time of the Emergency Budget in June.

Commenting on the Chancellor’s statement, Michael Ankers, chief executive of the Construction Products Association, said: ‘We knew this was going to be a difficult Review as far as construction was concerned. However, the Chancellor has acknowledged the important role that capital spending on construction can play in helping to provide for a private sector-led economic recovery. In particular, maintaining transport investment at £30 billion over the next four years will sustain employment and help encourage private sector investment.’

Nevertheless, Mr Ankers warned that public sector investment in construction over the next four years would be more than £20 billion less than in the last four years and would have significant consequences for the construction industry as a whole.

The Mineral Products Association (MPA), in its CSR briefing to members, also highlighted the Chancellor’s emphasis on infrastructure investment as a key element of in driving long-term growth, but pointed out that, in practice, the additional £2 billion per annum included in the spending plans only reversed a £2 billion per annum reduction included in the June Budget.

Among other specific departmental measures and announcements outlined in the CSR, the MPA noted that the reform of social housing, in particular the ability to charge higher rents, could deliver up to 150,000 new homes in England by 2014/15. If achieved, this would represent a significant increase in the recent GB build rate of 20–25,000 per annum.

Although the CSR is fundamentally about spending rather that taxation, the MPA also warned its members of an unpleasant surprise for those companies participating in the CRC Energy Efficiency Scheme. The Government anticipates that the sale of carbon allowances will generate £1 billion per annum by 2014/15, but instead of being recycled within the scheme the cost of these allowances will now go direct to Government as tax payments.

The MPA briefing concluded that the potential good news arising from the CSR, such as privately funded infrastructure and increasing social housing construction, were medium and longer term ambitions, suggesting that market improvements after 2012/13 may be higher than currently anticipated, particularly allied to improvements in private sector construction.

Nevertheless, the Association reiterated the warning that the market outlook over the next two years continues to look very depressed given the reductions in public investment set out over this period.

 
 

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