Trade body calls British construction Europe's 'bright light', but warns of recession if public spending cuts go ahead.
The UK construction industry has outperformed its European counterparts for the second year running thanks to the government's massive public spending on PFI projects, according to a report by a leading European trade body.

The report by the European Construction Industry Federation (FIEC) said that the UK construction industry grew 8.1% last year and is expected to grow 4.4% this year.

Britain's fortunes compared favourably with the rest of Europe, in particularly Germany, where the construction industry has been in a decade-long recession.

The report predicted that construction activity in Germany, France and Ireland would fall 2.5%, 0.7% and 5.4% respectively in 2003.

The report also encouraged greater use of the PFI on the Continent. It said: "Partnerships between the private and public sectors can serve to underpin our sector as a whole … this is certainly a path which should be carefully studied."

FIEC vice-president Peter Andrews said the introduction of the PFI in the UK had enabled large projects to go ahead that otherwise would not have been started.

He said: "When you look at the figures [for the whole of Europe], our figures are the one bright light."

Andrews, however, warned that Britain could face a construction industry recession if the government cuts PFI infrastructure spending.

Government spending cuts would have a major effect on construction

Peter Andrews, FIEC

He said: "Government spending cuts would have a major effect on construction at a time when we're seeing the private sector cutting spending as well – it would be very bad news."

It was revealed this week that chief secretary to the Treasury Paul Boateng has warned Cabinet ministers that their departments' budgets will be frozen or cut in the next spending round in order to reduce government debt.

Given the government's emphasis on health, education and the police, transport is an obvious target for spending cuts.

The FIEC report, called Construction Activity in Europe, also predicted that construction in the European Union as a whole would grow 0.5% this year, compared with 0.6% last year and 0.7% in 2001.

It warned that structural fragility in the European economy has had a direct impact on its construction activity.