Comment: Spending the morning after

Aaron Morby 14 years ago

The feeling of deep relief, at least within the civil engineering community, was palpable after Chancellor George Osborne delivered his verdict on future construction spending over the next four years.

On the face of it, transport and wider infrastructure spending fared far better than many even dared to hope.

But the morning after, the true pain is beginning to be felt from what stands as the biggest programme of cuts in a lifetime.

Chancellor George Osborne’s decision to release an extra £2bn for capital spending, deftly turned the dreaded day into an event that looked more like a routine Autumn spending review where he could trot off a longer list of projects going ahead than being axed.

Thankfully Crossrail and London Underground are safe, although a little bruised after project reprogramming and tinkering with budgets.

Strategic road and rail projects won a surprising reprieve and extra spending for coastal defences and nuclear decommissioning delivered a dollop of unexpected good news.

But nobody is getting off scot-free. Even after better than expected transport spending settlements, details of a host of projects falling by the wayside are emerging and it is now clear that Highway Agency spending will fall by nearly half.

Civil engineers may not be the clear winners they first seemed, but they go on to fight another day. The same cannot be said for Britain’s builders who face severe times ahead.

Much will be made about the £15bn being channelled into school building and maintenance, the reality is capital spending in education is destined to slump 60%.

The cuts to social housing are even more brutal and in the cold light of day look as high as 71%.

There are fresh opportunities for big outsourcing specialists that successfully convince local authorities bringing in contractor knowhow will save cash.

But for the masses of local and regional firms there will be a deadly dearth of projects. No more new libraries, town halls or youth centres, for that matter no more police or fire stations.

At first sight the Comprehensive Spending Review looked to have favoured the likes of Balfour Beatty and Morgan Sindall, but even they have hungry mouths to feed in Mansell and Lovell regional building businesses.

The landscape for building changed profoundly yesterday and every firm will be affected to some degree.

The Government has placed a big bet on the private sector stepping in to fill the void, bringing innovative approaches to financing housing and urban regeneration.

The construction industry is more than able to respond to the huge challenge ahead, but will need real support from central Government.

This Government is in a hurry, which may prove its undoing. Current ideas for getting house building up and running look more dreamed up than thought through.

Can some rent rises and loosening of financial rules really free housing associations and councils to build 150,000 homes in four years?

It is a tall order and would have been easier if the industry was given a fair run up at the challenge.

Likewise the private sector is more than able to use local authority assets and the new Tax Incremental Financing system to stir up town development. But councils must change their mindset if they are to agree to new ways of delivering improvements. This is critical as everyone on the ground knows, and an area where central Government must wield its power.

Changes of this scale take time, which many firms are running out of.

More fundamentally these big ideas need the banks to be on board and nobody has dared mention it but they currently are not cooperating.

The house building industry is in a mess because mortgages are too difficult to get, firms are going down as overdrafts are cut short and project finance from UK banking is impossible to secure.

This is not a healthy starting point and the Government will need to do some serious arm twisting in the financial sector if the economy is to stand any chance of recovering from these deep cuts.

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