Alistair Darling's pre-Budget report will not transform construction's fortunes but may bring relief to mid-sized firms
“Exceptional measures for exceptional times” was Alistair Darling’s verdict on delivering his pre-Budget report yesterday – but despite the chancellor’s attempt at winter cheer, large sections of the construction industry seem to have responded to him more as the Grinch than Santa.
A £3bn package of accelerated capital spending does not, as industry leaders have been quick to point out, equate to a miracle for construction. The industry is still going to be in recession next year, with the Construction Products Association predicting the biggest fall in output since the early nineties despite the government bringing forward projects across schools, roads and housing.
And job losses, predicted last week to reach one in five construction workers by 2011, are unlikely to be much lighter as firms cut outgoings as far as possible to try to get through the downturn.
But was it ever realistic for the industry to expect more than this? With borrowing set to hit £118bn next year – 8% of GDP – as a result of yesterday’s measures, it looks impossible that the chancellor could have brought forward any more spending.
The problem is that, for firms who specialise in only one of the areas to benefit – green refurbishment, say, or education – the actual impact of the spending will fall below what they had hoped. But in an economic environment where one decent medium-term contract can mean the difference between collapse and survival for some firms, the measures are undeniably a positive development for the industry.
In an economic environment where one decent medium-term contract can mean the difference between collapse and survival for some firms, the measures are undeniably a positive development for the industry
The biggest winners are likely to be medium-sized contractors who operate across a number of these areas: firms who may not have the security of a huge order book, but could now see a significant increase in the number of tender opportunities coming their way.
The real key to whether the measures will make a difference, however, will be over the level of control the government is prepared to exert over their delivery.
The pre-Budget report contains a surprisingly detailed breakdown of the areas targeted for spending within its chosen markets – the building of kitchens in around 300 primary schools, for example.
If this is indicative of proper research into the gaps in the procurement programmes, then the government will have succeeded in turning long-standing industry criticisms of its planning on their head.
If, as is far more likely, a full delivery programme has not been worked out, then Treasury officials will need to ensure that the time devoted to listening to the industry in the weeks leading up to yesterday’s announcement is replicated now the headlines have passed. The last thing the industry, and the economy needs, is for Darling’s Christmas gift to disappear off the back of the sleigh before it has hit its destination.