Industry voices its concerns 2
Published:  17 January, 2011

Howard Grant, managing director of Unimer thought that overall, the Spending Review was slightly more favourable to the construction sector than most forecasters had predicted. Although public finance capital expenditure will be £20bn lower than the last four years, it will be £3.5bn better than expected.”

Mr Grant was also relieved that transport had come out of the review slightly better than forecast. This, he said, will help support those companies involved with civils and infrastructure programmes. The Decent Homes programme will be completed with a further £2bn of funding. “The Green Investment Bank has been retained within the plans. That should be good news for Unimer’s joint-venture with the Green Energy Centre.

“The lack of capital investment will force the need for repair and maintenance expenditure, perhaps to a higher level than the Government might hope and there are already signs of increasing RMI spend in the education sector,” said Mr Grant.

He added that the review had done nothing to change or influence the house mortgage market. “The ongoing restrictions on lending in this sector remains the biggest negative sensitivity in private sector-funded construction.”

The gradual rise in unemployment of those in public-financed roles will have a negative pull on RMI spend on their homes, he added. “There is still a big question as to how growth in private sector employment will offset the public shortfall.”

Allan Durning, executive chairman of the National Buying Group, believes there are some signs of the start of a recovery in some private sector- financed construction. “The British psyche, in my view, does not handle a long lead time to bad news. We are best suited to knowing what the situation is now and dealing with it.

“During the run-up to the Spending Review, NBG partners were getting on with business as usual. Some were even expanding their businesses. But, let’s make no bones about it, trading is tough at present and merchants need to remain focused on the key drivers in their respective businesses.

“The key indices from the Construction Products Association and Nationwide show the respective barometers that measure our fortunes are holding steady. But, as always, that data is going to be challenged when the next latest press article is revealed.

“We need strong leadership from this coalition government to drive the economy forward and deliver the housing and infrastructure we and the future generations of this country deserve. We will only really see the fallout from the Spending Review early in summer 2011 as the CPA is predicting. That’s the point when we need to be in stronger shape as an industry.”

Cuts will make a bad situation dire for first-time home buyers, but will keep rates low for investors. James Moss, director at Curzon Investment Property, a leading investment agent, said: “With social housing being drastically cut back, there will be even more demand for private housing at a time where practically nothing’s being built because of the Government’s ‘nimby’ planning laws.

“This false economy, where supply is restricted, will push prices up – in full contradiction of what the housing minister has promised.

“This is great news for investors and anyone who can afford the weighty deposits mortgage lenders now require.

“The only upside of the cuts is that mortgage rates will be kept low as the Government looks to keep a lid on interest rates. Ensuring that Britain is attractive to private investment will be vital and low interest rates can help that.”

The heating industry gave a warm welcome to the RHI plans, although in some quarters concern was expressed about the potential for a bias towards certain technologies. The Spending Review earmarked some £860m for the Renewable Heat Incentive, funded directly by the Treasury and not by a levy on energy bills, as was previously expected.


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