Stop driving workers away

With two million employed in construction in the UK, it is evident that the health of the industry should capture the attention of politicians anxious to secure votes. The construction industry remains an important sector of our economy, contributing over 5% of GDP.

Decade after decade, the construction industry has borne the brunt of instability in the economy. In a classic case of "boom and bust", it is in construction that we find the extremes when the economy slows or accelerates. Mass lay-offs when work dries up are invariably followed by widespread labour shortages when it becomes expedient for government to increase spending in the public sector.

Productivity growth
This inherent instability damages the industry's ability to recruit, train and retain a skilled workforce. Expertise and experience are lost, reducing the industry's ability to improve efficiency, productivity and competitiveness. According to Oxford Economic Forecasting, productivity growth in construction has fallen from nearly 7% a year in 1987 to –1.5% in 2000.

It's hardly surprising that an industry with a falling productivity record loses its competitive edge in the global market. Construction overseas has traditionally been a major export-earner for the UK economy. But the DETR construction statistics for 2000 make stark reading. In 1998, British companies secured new overseas contracts worth £4.3bn. In 1999, new orders fell to £3.7bn. A fall in export orders of 14% in one year at best describes a volatile industry. At worst, it marks a once vigorous industry in decline.

In any industry, a healthy home market is the springboard to success overseas.

This is nowhere more true than in construction. But unlike most industries, the health of the construction sector is dependent on public sector investment. Construction and the jobs of two million voters by the way are a hostage to fortune in the government of the day's economic policy.

The danger, of course, is that by that time the skill base of the industry will have declined

The effect of the Labour Party's Comprehensive Spending Review has been some improvement in the construction industry's performance, with growth of around 2% expected this year, better than the industry's long-term trend. But the main engines of growth are expected to be in the repair and maintenance sector, which accounted for almost half the industry's output last year. It won't be until the medium term that performance will benefit from a boost from investment in public sector construction programmes. The danger, of course, is that by that time the skill base in the industry will have declined still further, and with it productivity and competitiveness. Instead of burgeoning public-sector construction being the springboard for our exporters, it could well present rich pickings for our overseas competitors.

There is a real danger that history will repeat itself. The last two decades have witnessed a near-terminal decline in our manufacturing industry. The knock-on effect in construction is clear from the rise in imports of equipment, plant and prefabricated material. If ever there was a wake-up call for the construction industry, it is the fate of UK manufacturing. Politicians must start to take seriously the need to create stable economic conditions in the industry. They have to address the need to ensure a steady supply of well-trained, highly skilled and motivated entrants into the workforce. And above all, they need to create a climate that nurtures best practice in modern and efficient management, not one that burdens business with over-zealous red tape.

Cutting red tape
The DTI estimates that there are some 700,000 businesses within the construction sector, the vast majority of which are small or medium-sized enterprises. Out of two million workers in the industry, about 700,000 are self-employed. A recent survey by the Federation of Small Businesses of its members found that 39% put the reduction of red tape as their first priority. As one who built a small business in the construction industry from a workforce of one to 30 over four years, I learned to carry the burden of red tape. As a Liberal Democrat I am determined to try and cut it.

Small business is the engine of economic growth. To allow it to flourish, we must reduce tax and cut business rates. We must stop European institutions interfering where they shouldn't and prevent Whitehall departments "gold plating" European regulations with extra rules.

To help kick-start small business, we must provide new sources of "seed corn" capital. We need to develop new codes of banking and new sources of private finance, including grants, equity partnerships and mutual guarantee schemes.