Opinion: Construction Plan B must focus on banks

Aaron Morby 12 years ago

The contraction of the economy in the last three months of 2010 has set warning lights flashing.

Urgent action is needed to stimulate growth and jobs but now is no time to start calling for a U-turn on spending cuts.

The Government is not about to, nor should it, throw its fiscal plans out of the window on the basis of the latest national output figures.

The new GDP figures are provisional estimates and were undoubtedly affected by bad weather.

But they have highlighted the pivotal role construction plays in the fortunes of the wider economy. So a 3.3% contraction in construction output, even if it is a provisional estimate, has too be taken seriously.

With the economy flat-lining, and inflation and unemployment rising, more needs to be done about growth, and properly stimulating construction has to be part of that solution.

The fact is construction is careering headlong into recession and taking the wider economy with it. Calls to relax spending cuts and return to where we were under the last Government have to be ignored.

The private sector is the key to the future. But it is faltering, not because there is no will to invest, but because there is no money available.

The last few months have seen a welter of plans advanced to build towering offices in London. They are not being financed by UK banks, the investment is coming from overseas.

As things stand pinning the country’s hopes on the private sector filling the gap is wishful thinking.

A £1bn regional growth fund and some corporation tax breaks are not going to do the trick. Nor will a bewildering array of grants and initiatives solve the problem in time.

Everyday a respected building contractor or civil engineering firm seems to go under, not always because it lacks a pipeline of work but because UK banks have had a sudden change of heart about how much they want to lend.

Fickle banking is costing construction jobs and stifling industry growth.

If there must be a U-turn it must be on the tight regulation on banks and lending.

Most banks can only be cajoled into action, but the two state-owned banks can be ordered to change their ways and invest.

That, after all, is what they are supposed to do.

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