The construction sector has been a mainstay of the UK economy in recent years, representing 9% of GDP and by 2007 employing roughly two million people. Yet in the last twelve months that building boom has turned to bust.
For example, the Construction Skills Network has just predicted a further 3% contraction in the number of jobs for this year, with no improvement expected in 2010. Indeed, the Federation of Master Builders is predicting that 52% of builders will be making staff redundant over the coming months. So, what the industry needs is action.
Back in the November Pre-Budget Report, the Government announced that it would bring forward £3 billion worth of capital spending from the 2010-2011 budget. Yet within weeks, the construction trade press reported that nearly £1.7 billion of the Government’s health and education projects had actually been halted. Now it’s clear that many current PFI schemes simply won’t proceed. So there’s a serious gap between Ministers’ words and their actions.
Three ways to help
So what can be done? I would make three
suggestions: securing working capital; helping cash flow; and enabling
small and medium sized construction firms win more work.
First, we need to help the sector secure the working capital it
needs. This is why Conservatives have called for a £50 billion National
Loan Guarantee Scheme. It would be a simple, accessible way to underpin
bank lending for viable businesses, regardless of size or sector.
Rather than Labour’s myriad of complex schemes, a National Loan
Guarantee Scheme would offer simplicity and consistency.
However, in recession construction also needs help with its cash
flow. So we have set out practical ideas which will provide direct
help. These include deferring VAT payments for up to six months;
cutting payroll taxes for firms with fewer than five employees; and, in
due course, cutting the main rate of corporation tax from 28p to 25p
and the small company corporation rate from 22p to 20p. For many
builders these steps could make all the difference.
Winning more work
Yet in a recession, cutting costs won’t save
most firms. They need to win more work, especially the small and medium
sized firms. I would suggest two practical steps that would make a real
First, we want to enable the sector to help us make the existing
housing stock more energy efficient. It’s in the interests of our
environment, as a third of carbon emissions come from housing, and it
would also benefit most household budgets.
Our plan would help kick-start home energy efficiency works by
entitling all householders to secure approved home energy efficiency
works worth up to £6,500. The cost of this work would be recovered
through future energy bills, for anything up to 25 years, but the
payback in lower fuel consumption would be substantially shorter.
The second step for SMEs in the sector to win more work involves
making it easier for them to compete for pubic sector contracts.
At present the public procurement rules are needlessly complex and
often deter many small businesses from bidding. Take the rule which
many public bodies apply, namely that you can only bid for a contract
if you can first show three years of fully audited accounts.
Or how about the fact that, even before bidding for a contract,
firms often have to pre-qualify not once, but time after time. The
forms and questions are often the same, yet many Departments and public
agencies demand repeated pre-qualification.
This has to stop. That’s why we have made it clear that the three
year rule must go and why we will ensure that contractors need only
pre-qualify once in any sector, for contracts worth up to £50,000. By
stripping away these petty and time wasting rules we can help thousands
of SMEs bid for the billions in public sector contracts and so keep
Together, these actions – securing working capital, helping cash
flow and enabling SMEs in the sector to win more work – would make a
real difference to the construction sector.
Time is running out for many firms in construction. Whilst we have
heard many announcements from Ministers, they have singularly failed to
act, to provide the practical support needed.
Before Christmas many people thought that the frenetic activity by
the Prime Minister meant real help. Now business – in all sectors – is
beginning to realise that there’s a big gap between the Ministers’
words and their actions. No one can afford for that gap to grow any