One of the UK’s leading steel glazing companies has warned the government not to make further cuts to infrastructure projects amid signs that the construction sector remains firmly in the grip of a workload gap that the private sector cannot fill.
Wrightstyle, the Devizes-based company that supplies advanced glazing systems worldwide, also called on the government to keep interest rates at their current level until at least the end of the year to protect the sector.
Despite signs that the underlying trend may improve in the second half of the year (1), driven largely by private sector construction, the scale of public sector cutbacks at the end of 2010 remains a cause for real concern, according to the company.
Despite data from the latest RICS Construction Survey suggesting that private sector workload is expected to increase, with a 16% jump in commercial planning approvals in the last quarter of 2010 (2), construction output fell by 13.8% in April (3).
That output figure is reflected in the value of projects starting on site in the three months to May, which was 21% lower than a year ago (4) largely due to cutbacks in affordable housing, health and education. The underlying value of UK residential construction starts was 31% lower.
“The UK construction industry comprises over 300,000 firms employing over two million people, and the sector contributed 8.3% of Gross Value Added (GVA) in 2008,” said Denis Wright, chairman. “As a country we cannot afford to allow the sector to shrink further, when the main problem is a workload gap before the private sector picks up again.”
It’s likely, according to Denis Wright, that the construction industry will see further contraction over the next two years with only weak growth from 2013. Output is likely to drop 0.5% this year, with a 2.8% drop in 2012 – largely due to cuts in public sector projects. (5)
Although the Office for Budget Responsibility expects GDP to rise by as much as 1.7% this year, other commentators believe that growth will be at a much lower rate and, overall, the economy could slow further in the months ahead.
“While we appreciate that the public sector has less to spend in the current climate, the value of the construction industry to the wellbeing of the economy cannot be under-estimated – as an employer, often of young people, and as a generator of revenue for the Treasury,” said Denis Wright.
(2) EMW, law firm
(5) Construction Products Association