Both parties admit that the axe will have to fall on public spending soon, although politicians have been too squeamish to describe this in detail

The industry is searching for good economic news like exhausted lifeboat occupants scanning the horizon for signs of land. And there have been signs … oil prices are rising, which has quickened investment in Abu Dhabi, Australia’s economy is recovering, and for job hunters willing to go west there are tempting opportunities in Canada (page 46). In the UK, the comatose housing market has begun to twitch: for example, Persimmon is to activate 50 sites in the coming months.

But the reality is that there is no land in sight. Only 72,000 private houses are expected to be completed during 2009, the lowest number since 1924. And the Construction Products Association and Experian predict that construction output for 2009 will show the steepest decline since records began (pages 12-13). In the medium term, we’re faced with draconion cuts in public investment. Both political parties admit that the axe will have to fall. Although politicians have been too squeamish to describe this in detail, Steve Bundred, the chief executive of the Audit Commission, has said we need a £50bn package of cuts.

The worry is that capital investment will fall to eighties’ levels before the commercial sector recovers: if that happens we’re sunk. Housing will not be making a meaningful contribution to demand for a year or so and private commercial developers will not be on site much before 2012, by which time the banking system should be fully operational. But at the last Budget, the Treasury said capital spending was projected to fall after 2011, and would run at half its current level by 2013/14. We have to hope that that timetable isn’t brought forward. We all accept that the UK is up to its gunwales in debt, but slashing capital spending more quickly is like throwing your oars away to lighten the load. For example, Crossrail, which is looking vulnerable (page 24), will ultimately bring in many pounds for every one spent. Of course it’s easier to cut what you haven’t started rather than tackle operational expenditure, yet the NHS has a budget of £105bn, only 4% of which is capital expenditure. Wouldn’t it lead to better outcomes if we, for example, renegotiated GPs’ contracts rather than cancelling polyclinics?

We’re all searching for certainty in a world where there is none. But at the very least we need the government to stick to its capital spending and revive the PFI. Until we have this, the industry is right to be concerned. Graham Watts, head of the Construction Industry Council, has a vivid alternative to our lifeboat analogy. He says the industry is like “a man with a rope around his neck, one leg balanced on a stool marked public sector construction, the other leg dangling in the air where there was once private sector development”. But however you want to visualise the industry’s predicament, it looks pretty precarious.

After the fire

Last week’s fire in Camberwell should set alarms hooting for building owners and the industry. Although it’s too early to say why this fire was so devastating, some facts are emerging: for example there were reports of rubbish in escape corridors and fire doors propped open in a neighbouring block. The fire also raises questions of what can be done to make these old buildings safer (this one was built in 1959 and refurbished two years ago). In Scotland, every refurbishment must comply with the latest fire regulations. To follow its example would be hugely expensive in this country, but we ought to require smoke alarms at the very least. Building owners need to get their act together, too; every resident should understand the risks and how to get out if the worst should happen.