How the £6.2bn spending cuts will affect construction + reaction

Details have begun to emerge of how Chancellor George Osborne's £6.2bn of spending cuts will affect the construction industry.

The Department for Transport has been particularly badly hit, with the following impact:

• Improvements to the A23, the widening of the A453, and phase three of the M6 Birmingham box are to be deferred.
• Network Rail will have £108m cut from its central grant.
• The £100m Transport for London receives from the DFT is also set to be axed.
• Local authorities will face a £309m reduction in grants from the DFT.

Other cuts include:

• £1.7bn from “delaying and stopping contracts and projects, including immediate negotiations to achieve cost reductions from the major suppliers to government”.
• £600m of savings from quangos.
• £150m from the Government's overall housing budget.
• £27m from the Olympics Delivery Authority.

However, there was some good news for construction:

• An investment of £170m in social housing to fund 4,000 new homes.
• An extra £50m of spending on further education colleges, and expansion of the Academies programme. No cuts to the BSF programme.
• £150m of investment in adult apprenticeships for SMEs.

Reaction to the cuts from the construction industry was mixed.

The Civil Engineering Contractors Association expressed its disappointment that the cuts have led to a deferral of vital strategic road schemes.

CECA National Director Rosemary Beales said: “We are disappointed that these schemes have been deferred by a Government that is still in its very early days.

“We would have expected the strategic road network and the managed motorways programme to be included in the autumn spending review when proper consideration could be given to balancing the need to cut the deficit with the need to invest in infrastructure. Transport will play a key role in delivering a sustainable, low carbon recovery and we cannot afford to cut it adrift.“

However, Richard Diment, director-general of the Federation of Master Builders, felt the cuts would help to restore business confidence. He said: “The new Government is quickly facing up to the difficult financial challenges that this country faces and the need to get public debt back under control.

“Spending decisions over the coming months will inevitably have an impact on the construction sector but it is encouraging that the Government recognises the need to invest in growth and the importance of training and housing in delivering this.

“The reallocation of £150m for adult apprenticeships and the £170m for social housing from the overall savings announced, demonstrates that the Government understand that these issues remain a priority even in such difficult economic circumstances.”

The full break down of cuts by department is as follows:

• Department for Transport - £683m.
• Department for Communities and Local Government - £780m.
• Department for Business, Innovation and Skills - £836m.
• Department for Education - £670m.
• Department for Work and Pensions - £535m.
• Department for Energy and Climate Change - £85m.

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