Construction Council voices concern that credit woes are causing long-term damage

Construction industry leaders have said the government risks inflicting long-term damage to the economy unless it does more to boost lending to the industry.

Following the second meeting of the CBI’s Construction Council, chairman John McDonough warned that a shortage of credit, especially for small and medium-sized companies, is leading to many construction projects being delayed or mothballed.

He said: “The government has announced some measures to support small and medium-sized businesses, which will hopefully help some firms along the supply chain. But access to credit has tightened considerably over the last few months and we urgently need to get lending working across the whole of the economy. This includes the availability of mortgages for first-time buyers at affordable loan-to-value ratios.

“Unless the government takes bold steps to kick-start lending across the board, we will see more construction firms going under and more skilled jobs lost, which will be difficult to replace when demand picks up again.”

McDonough also warned that a shortage of credit insurance was a problem for the industry.

Credit insurance against non-payment of subcontractor invoices has dried up in recent months as concerns grow over the credit-worthiness of larger players.

McDonough said: “Firms need to be confident their cover isn’t going to get pulled unexpectedly halfway through a contract.”

The Construction Council has also lobbied for the appointment of a chief construction officer to drive improvements in the government’s procurement processes, as well as overseeing national construction projects.

“A strong and influential chief construction officer is needed to cut through the bureaucracy and help get these projects up and running quickly. There is no time to lose,” a statement said.