Government investment in public sector construction programmes fell 10% last year, according to figures calculated by the RICS.

The organisation’s latest UK economic briefing also predicted that there would be a resurgence in spending this year.

The briefing says: “The government seems to have encountered problems in accelerating public sector investment plans, which have failed to match original targets once again.

“In 2004, gross public investment fell 10%. However, in view of the underspend, publicly sponsored construction could be set for a fresh bout of momentum in 2005.”

As a result, the RICS believes that fears of price inflation in the industry will remain.

The brief also notes that construction output overall rose 3.6% last year, but said this masked a gradual slowdown as the year progressed. Output rose 0.8% in the final quarter.

The increase in total output was largely driven by a sharp rise in housing orders, which increased 22% in the second half of last year. The report commented that this had “defied uncertainty in the wider housing market”.

Infrastructure orders are still weak after a substantial drop in 2003, but private commercial work is on its way back, helped by stability in the wider economy and low interest rates.

The brief also points to a gradual recovery in the office–occupier market and notes that market conditions in housing are beginning to stabilise. It predicts that a mild recovery in house prices in the latter half of this year “as wages and employment show further increases”.