Adrian Barden: don't cut capital spending on construction projects.

Construction investment 'essential to economic recovery'

Published:  05 November, 2009

LONDON: The Construction Products Association has written to the Chancellor ahead of his pre-Budget Report statement, urging him not to cut capital spending on construction projects, as this will jeopardise both the short-term economic recovery of the UK as well as its longer-term economic prospects.

The Association's submission recognises the need to tackle the huge levels of public finance debt, but insists that capital spending on construction should be maintained even during these challenging economic times.

Adrian Barden, chairman of the CPA said at the autumn luncheon held in London today: "Although there has been some fiscal stimulus in the UK, the amount compares very poorly to the massive injections of public funds into construction projects in other major western countries such as the US, Germany and Australia, all of whom have come out of the recession sooner than the UK.

"Cuts to capital spending on construction have traditionally been seen as an easy way to address financial problems and yet, ironically, capital spending on construction projects provides the most immediate and beneficial way of stimulating economic recovery and leaving a beneficial legacy from the investment. A recent report by LEK Consulting, in which the Association was involved, has shown that for every pound spent on construction output, £2.84 is generated in additional economic activity.

"Maintaining capital expenditure is vital to ensure the provision of the housing, schools, energy and transport infrastructure necessary to give the UK a successful platform for long term economic growth."

Along with maintaining capital investment, the Association has highlighted a number of other issues in its correspondence with Chancellor in advance of his pre-Budget Report. These include:

Further pressure on the banks to make credit more freely available to viable companies.

An extension of the credit insurance top up scheme for a further six months.

A commitment to ensure that net public investment does not fall below 2.25% of GDP.

No further tax increases on business.

A commitment to tackle the regulatory burden on business and particularly to agree to review the impact of the planning system on business.

Agreement to undertake a review of the products and solutions which are eligible for a lower rate of VAT because they will help deliver improved energy and water efficiency in our homes.

The luncheon was held at the Park Lane Hilton and attracted over 450 guests from all walks of the industry. A full report will appear in the November edition of Builders' Merchants News.

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