The latest statistics have revealed that the UK economy shrank by 0.7% in the second quarter of this year and this was primarily due to a 5.2% fall in output in the construction industry.
Construction union Ucatt has called on the government to invest in social housing to get the economy growing again. The budget for new social housing was cut by 60% in the October 2010 comprehensive spending review.
Ucatt general secretary Steve Murphy said: “We are now witnessing the grim results of the government’s economic policies. The government is by far the construction industry’s largest client. By starving it of funding they are wrecking the industry and damaging the economy as a whole.
“The government must take their heads out of the sand and invest in social housing. It is economic common sense. It will kickstart the construction industry by returning confidence to the sector, providing jobs for construction workers and those employed in the supply chain and it will provide homes for families who desperately need them.”
For the National Federation of Builders, the solution lies in tax reform. It argues that reducing the standard rate of VAT to five per cent for home improvements would:
- boost the economy by around £1.7bn in 2012, rising to more than £20bn by 2020;
- create 100,000 construction-related jobs by 2020;
- bring more than 20,000 homes back into use every year.;
- make the government’s Green Deal home improvement programme more attractive to consumers by making their money go further.
NFB chief executive Julia Evans said: “Over 5,000 construction businesses have gone out of business since 2010. At a time when the economy is stuck in recession, the simple, single action of reducing VAT on home repairs to five per cent could boost the economy by almost £2 billion and create over 26,000 construction jobs in 2012 alone – partly offsetting the 4,000 construction job losses caused by raising the rate of VAT to 20 per cent in January 2011.”
Federation of Master Builders (FMB) chief executive Brian Berry agreed. He said: “We think it is now time for the government to think more openly about stimulating private sector demand, particularly for the industry's hundreds of thousands of small businesses. The Chancellor should cut VAT on all housing repair, maintenance and improvement work to 5%, which would provide a big stimulus to the UK economy and create over 100,000 new jobs by 2020. It would provide immediate help to private landlords or local authorities to bring more existing properties back into use, and provide a bit more certainty about demand for the government’s flagship energy efficiency scheme the Green Deal.”
The Civil Engineering Contractors Association (CECA) felt that unlocking stalled projects was more important. Director of external affairs Alasdair Reisner said: “While we welcome steps the government has taken to facilitate long-term growth through infrastructure provision, it is in the interest of everyone to stem the current collapse in the industry. CECA believes more can be done to halt this malaise through the unlocking of stalled projects and targeted investment. We have been working with government and other industry bodies to identify means by which an immediate uplift in activity in the sector may be effected, by identifying work that may be rapidly released across the UK.
“It of paramount importance that the government makes achieving growth in the construction sector an urgent priority in the short-term, as well as the basis for achieving long-term economic sustainability.”
Scottish Building Federation chief executive Michael Levack reiterated his plea for government action to support the industry: “We’ve now seen six months of falling output from the UK construction industry in 2012 – a reduction of more than 10% during that period. On that basis, the industry has now officially entered a double dip recession. Based on the experience of the previous recession in 2008/09, I fear we can expect further reductions in output during the months ahead.
“Our industry continues to shed jobs and capacity at an alarming rate and we now need immediate action from Government to turn this situation around. That must include radical tax measures such as cutting VAT on building repairs and maintenance to 5% and a reinforced programme of direct capital investment to get stalled building projects moving.”
Construction Products Association economics director Noble Francis said: “Although the vast majority of commentators have been predicting continuing recession, very few will have expected such a sharp fall. For construction the position is now very worrying, as although we have known for some time that public sector activity would begin to decline, because of the government’s deficit reduction plan, the hoped for recovery in the private sector has not materialised. As the construction sector is such a key part of the economy, until we see recovery in construction, we will not have the economic growth the UK needs.
“According to our latest forecasts, which were published this week, construction is unlikely to return to growth until 2014. Government has acknowledged that construction will be a part of the solution for our economic woes, but if they are serious then they must act now to stimulate growth and drive recovery.”