Spending cuts: Industry reaction

Grant Prior 12 years ago

Civils contractors believe their campaign to protect infrastructure spending saved a number of projects from George Osborne’s axe in today’s spending review.

CECA National Director Rosemary Beales said: “We await the detailed announcement next week by the Secretary of State of exactly what cuts have been made to transport projects. However, the Chancellor has made it completely clear that he links investment in infrastructure with economic growth.

“The Chancellor gave a welcome reprieve to a number of transport projects across the UK, including M25 widening and the Tyne and Wear Metro which are of course very good news for contractors.

“We hope the positive outlook for transport continues in the announcements due from the Department for Transport next week.”

Paul Fleetham, Executive Director, Tarmac National Contracting, added:  “It is clear that there is a green light for some major schemes.  This, along with extra money for flood defence and wind power development, means that it is not all bad news for the construction sector.

“However, this should not diminish the scale of the challenge we all face in delivering schemes at a time of extreme budget constraint.

“The 7% annual cut announced for council budgets means that we must continue to drive innovation and efficiency to ensure that the UK’s roads building and maintenance programme does not suffer.”

Richard Threlfall, UK Head of Infrastructure at KPMG, said: “For infrastructure providers today’s announcement has been good news.

“The industry has been united in pointing out the importance of infrastructure investment in helping to power the country out of recession and the Government appears to have listened,  indeed the Chancellor named Infrastructure as one of the four top priorities (together with health, education and security).

“Overall capital spend is up £2bn a year over the next four years and that has allowed the Chancellor to make a number of “good news” announcements.”

“Of course the pain and the gain is not evenly spread. Transport is a big winner with a £30bn capital settlement and Crossrail, tube investment, Midland Metro, Tyne and Wear Metro, rail electrification, Mersey Gateway and a raft of road improvements all given the green light.

“Renewable energy will benefit with a commitment that the UK should continue to be a “leader in the green economy” and the promise of £1bn for the Green Investment Bank. The lack of comment on nuclear is disappointing given that renewable energy alone will not be sufficient to keep the lights on in the medium term.

“What is clear is that the Government wants to see continued investment in social infrastructure with £15.8bn pledged to maintain and rebuild schools, albeit not via BSF, mention of further prison investment, greater freedoms to invest for health Foundation Trusts and more money to go into social care.

“The biggest loser in social infrastructure is social housing, with investment set to halve. Overall the KPMG verdict would ‘could have been a lot worse”.

Rick Willmott, Group Chief Executive of Willmott Dixon, said: “The cut in housing grant was no surprise.

“The key point is that the onus will be on private sector companies like Willmott Dixon working with local authorities and RSLs to help unlock new and innovative funding streams that do not rely on Government grant.

He added: “The funding streams are out there, such as Tax Incremental Financing, and Willmott Dixon will be looking to bring together funders, land owners and social landlords to create development opportunities that move beyond Government subsidy.

“In the future, there will be a more unlocking of public sector assets, mainly land, to fund new development and what is clear is that we are entering an era where tradition funding models will be replaced by new opportunities that will see institutional funders in the City play a bigger role.”

Construction products suppliers were also braced for even worse news in 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 £30bn over the next four years will sustain employment and help encourage private sector investment.’

“Nevertheless, public sector investment in construction over the next four years will be more than £20bn less than in the last four years and that will have significant consequences for the construction industry.

“We hope that following today’s announcement there will be a recovery in confidence in the private sector now the uncertainty surrounding the CSR is out of the way.

“A commitment to Crossrail ends speculation about the long term prospects for that scheme and we welcome the support for the Renewable Heat Incentive as a contribution to improving the energy efficiency of our existing building stock.

“Where we urgently need greater clarity, however, is the mechanism to encourage investment in private housing and this will not happen until we have agreement over the New Homes Bonus incentive and reforms to the planning system.”

Kathryn Hiddleston, Construction partner at business and financial advisors, Grant Thornton UK LLP said: “On a positive note, the Government intends to increase the existing levels of capital spend by £2.3bn a year to 2014/15 to fund projects with long-term economic value.

“This includes over £10bn on nationwide high value transport maintenance and investment and more than £14bn for Network Rail investment. This is good news for the large scale civil contractors.

“Changes to social housing so that new tenants will pay 80% of market rents will help fund the development of 150,000 of new social homes over the next four years. Welcome news for a beleaguered house building market.

“However, where the Government gives with one hand it can take away with the other.

“The Government wants to devolve significant financial control to local authorities and – despite pledging to maintain significant funding for schools and hospitals – it is requiring local government to achieve savings year on year of 7.5% over the next four year at the same time as freezing Council Tax for 2011/12.

“All this will undoubtedly have a draconian effect on the number and value of projects available for regional builders.

“On a really positive note Mr Osborne announced an increase in the funding for adult apprenticeships by £250m a year by 2014/15. It is to be hoped that a large proportion of this will be directed towards developing skills for the construction industry.

“In conclusion, potential winners are the large scale civil contractors and social housing developers but the medium to small regional outfit may find that competition becomes even more keen for an ever-decreasing share of local council spend.”

Steve Bratt, new Group CEO of the Electrical Contractors’ Association (ECA), said: “While I am delighted that the Chancellor has honoured his pledge to protect infrastructure spending, by committing £30 billion to key projects such as the Tyne and Wear Metro and Crossrail as well as investment into the regions, I am deeply concerned about his plan to only build 150,000 affordable homes over the next four years.

“In 2009, 113,000 affordable homes were built; this was the lowest level over the last 60 years.  Mr Osborne’s decision will seriously impact jobs and opportunities within the construction industry, and I wonder if 37,500 homes each year is enough for those in low paid professions and key workers looking to get a foot on the property ladder.”

Latest news

Moving in to new markets paying off for McLaren

Contractor carving out new niche as leading player in heavy refurbs
2 days ago

Plan to add retentions record to payment reporting law

Government consults on tougher reporting to include disputed invoices and retention policies
3 days ago

Morgan Sindall wins £88m Beckton DLR depot upgrade

Delayed work to start on Docklands Light Railway train maintenance depot in East London
3 days ago

Hare and Severfield win £250m Sellafield deal

Country's two biggest steelwork contractors secure 17-year framework
3 days ago

Max Steward returns to head up ISG’s Agility fit-out arm

Former ISG project director returns after three years to take up MD role
3 days ago

McLaren wins massive Portland House refurb

Construction to start this year on £380m revamp of 28-storey building in central London
3 days ago

Green light for £275m HS2 Midlands nerve centre

Trio of contractors battling it out to win huge new depot near Birmingham
3 days ago

Winners named for Government £10bn offsite framework

29 firms secure places on mega framework for schools, healthcare, defence and justice jobs
4 days ago

ISG, Amey and Costain now industry’s quickest payers – list

Average payment times from main contractors slip by a day
5 days ago

Staff at Outco Surfacing start looking for new jobs

Administration notice filed two years after acquisition of NMC Group
4 days ago

£4.75m building work provision tips Higgins into the red

Partnerships business counts cost of changes to building safety rules
4 days ago

John F Hunt snaps up London temporary works design firm

Demolition contractor buys geotechnical and structural engineering design specialist RKD Consultant
4 days ago

Vital Energi lands £13m package at Plumstead regen site

Specialist will start on site this summer helping to transform the former home of Arsenal FC
4 days ago

Galliford Try to start £14m Scunthorpe Market scheme

Firm will build NHS staff accommodation and offices in two phases
4 days ago

Vast £500m British Library expansion go-ahead

London Mayor still needs to give final nod to 800,000 sq ft extension at St Pancras site in London
5 days ago

Wates names new chief executive

Cork-born Eoghan O’Lionaird to join later this month
5 days ago

Keltbray director joins Barhale as North East chief

Mark Wood heads operations in Yorkshire and North East England
5 days ago

Major London City building green deep retrofit approved

St Bride’s Tavern near Fleet Street will be demolished for the building expansion
5 days ago

Gilbert Ash lands starring role in £38m Welsh theatre revamp

Contractor to start work this year on Theatr Clwyd upgrade
5 days ago

Property clients to ramp up spending on decarbonising

Survey reveals nearly half of property chiefs plan to speed up spending on net-zero programmes over next twelve months
5 days ago

Average self employed labour rates top £1,000 a week

Average weekly earnings reach high for skilled trades
6 days ago

BAM wins £49m Harrogate Convention Centre revamp

Local council hopes to sanction work start this autumn
6 days ago

Renaker to top-out Manchester with 71-storey skyscraper

Developer lifts the lid on planned five-building cluster for phase 3 of Great Jackson Street development
6 days ago

Costain bridge lift delayed by ground conditions

National Highways chiefs postpone planned lifting operation
6 days ago

Nexus sells utilities and EV contracting arms for £78m

Group to now focus on remaining business at south east housing civils contractor Tamdown
6 days ago

Speller Metcalfe lands lead role on £40m Tamworth revamp

Town centre to be transformed under ambitious plans
6 days ago

Scaffold boss banned over covid loan abuse

Eleven-year director ban after misuse of £50,000 loan
6 days ago

Gove issues six weeks ultimatum to sign building safety contract

Developers told to sign Government contract issued today or be banned from building homes
7 days ago

Firm fined £120,000 for lifting two builders in a telehandler bucket

Rochdale builder Hoyle Developments fined after repeated safety breaches
1 week ago

Hunt quashes reports HS2 will stop at Old Oak Common

Chancellor says no "conceivable circumstance" where HS2 would not terminate in Central London
1 week ago

Contractor services