Government's capital spending boost will not save construction from biggest fall in 20 years

Construction will next year see the biggest fall in output in almost 20 years despite government plans to bring forward capital spending, an industry body has warned.

The Construction Products Association (CPA) welcomed the chancellor's announcement yesterday in the pre-Budget report that capital construction projects would be brought forward but said the move was not enough to stop the industry suffering.

Chief executive Michael Ankers said: “Overall, even if the £3bn was all spent next year, the construction industry in 2009 would still see the largest percentage fall in output since the early nineties, brought about by the sharp fall in private sector investment in construction - offices, retail, entertainment, as well as private housebuilding.”

He said the key question was how the government would tackle existing programmes that “have fallen hopelessly behind schedule” and said bureaucracy, not funding, was the main challenge.

Nevertheless, Ankers urged Alistair Darling to bring forward the programme announced in his pre-Budget report “as a matter of urgency” and warned that the government must not fund later debt repayments with cuts in construction further down the line.

He said: “A degree of caution should be noted, given the extremely high levels of borrowing that the Treasury is expecting over the next few years to fund the expenditure. This borrowing will need to be repaid in the medium to long term and it is critical that this does not occur through cuts in capital spending within construction.”

The CPA added that it was “disappointing” that £100m set aside for energy efficiency measures for housing focused only on insulation and ignored other measures such as double glazing and boiler upgrades.