The price of austerity

Published:  07 July, 2010

LONDON: The construction industry faces growing uncertainty amid government plans to cut spending on building projects.

Experts say that building firms such as Costain, Balfour Beatty and Waites must fight harder if they are to clinch contracts that dodge the axe. Manufacturers such as steel firm Corus and glass maker Pilkington could be hit as the government takes the knife to projects involving hospitals, prisons, schools, social housing and local authority buildings. Further down the supply chain, brickmakers are braced for a contraction in their order books.

Balfour Beatty told shareholders yesterday that there were uncertainties in some parts of its markets, "particularly with regard to government funding of infrastructure investment."

Building and support services group Carillion said "cuts in public expenditure are in line with our plans for reducing the size of our UK construction business".

Councils have been told by government to cut their budgets prompting local authorities to embark on their own spending reviews. Last week, shares in social housing maintenance group Connaught dived after it warned that budget measures would hit profits as councils postpone capital expenditure plans.

Noble Francis, economics director of the Construction Products Association said its assessment is that capital spending on education alone will nearly halve to £4.5bn over the next few years. "That will lead to further substantial job losses for our members," he said. The association estimates that capital spending across all sectors will fall from £69bn this year to £45bn in 2013.

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