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Contractors urge George Osborne to put words into action

Construction leaders have urged chancellor George Osborne to turn his words into action after he outlined his commitment to building and infrastructure to CN last week.

Four weeks ahead of his budget, Mr Osborne stressed the government’s commitment to construction, and told CN infrastructure is “vital” to enable the UK to compete in the global race.

Paul Sheffield, Kier’s chief executive who is spearheading the Creating Britain’s Future campaign aimed at encouraging investment into the industry, said: “The construction industry has gone through a tough time over the last few years, in responding to a significant reduction in available work. This comes after a sustained period during which it has repeatedly delivered great projects, on time and budget, to the delight of customers. 

“We need to encourage the government, local authorities and private developers alike to invest in infrastructure at this point in the economic cycle. 

“The nation needs it, jobs will be created in the heart of our communities and the industry will deliver.”

Mr Osborne spoke to CN while in Birmingham on Friday, hours before the UK lost its triple-A credit rating, to promote the launch of the Greater Birmingham and Solihull Local Enterprise Partnership’s (GBSLEP) enterprise zone.

Asked what role construction can play in economic recovery, and when the industry can expect to see more immediate projects coming to the fore, Mr Osborne said economic infrastructure is really vital to a country like Britain and to a city like Birmingham so the UK can compete in the global race.

He said the country has the right skills and the right universities, but “we also need the actual physical infrastructure, whether it’s longer-term projects like bringing High Speed 2 to Birmingham or whether it’s shorter-term projects like extending the runway at the airport”.

Mr Osborne said the coalition is “spending more than our predecessors planned to spend on physical infrastructure, despite the tough economic situation and the absence of lots of money to go around.”

Interserve chief executive Adrian Ringrose told CN that “all we need is people digging holes and putting bricks on each other”, rather than a National Infrastructure Plan that recycles schemes such as High Speed 2.

“Now is a very cost effective time to be buying construction services, you get a lot for your buck.

“Operationally we are bigger than we were a year ago because people are getting more for their money, we are actually delivering more, but financially we are flat.”

Galliford Try’s construction managing director Ken Gillespie said the industry has been hit hard by government indecision on big capital spending.

“Central government cut early when they should have been investing in infrastructure.

“So they cut projects and pulled them out, then in 18 months to two years reinstated most of them and are now trying to get stuff out there. It’s not easy,” he said.

Although he was “encouraged” by the replacement for the private finance initiative, and the government’s past statements that it needs to invest in infrastructure, he added: “I’m still concerned about the pace and the government’s ability to convert it into real work on the ground.”

While Carillion’s chief executive Richard Howson told CN he welcomes the return of PFI as private finance 2, but called on government to set out a pipeline of work that contractors can tap into.

Mr Osborne said on Friday that Birmingham is a great example of a city with an innovative approach to infrastructure investment.

Miller Construction’s chief executive Chris Webster, who sits on the GBSLEP, said the industry needs to act now to position itself for the growing importance of regional autonomy and LEPs, saying “the greater involvement of the industry in the LEPs will generate greater business for the industry as a whole”.

Although several firms are already involved in some of the 39 LEPs across England, including Carillion, Lafarge, Henry Boot and WYG, he added: “There’s a call to arms to the executives of the industry.

“We are all too quick to criticise procurement processes and funding, but how willing are we to get our sleeves rolled up and play a prominent part in making these things happen?”

The Miller Construction boss will also host the Creating Britain’s Future campaign in Birmingham on Tuesday.

The UK Contractors Group campaign aims to highlight the vital role of construction for economic growth, after launches in London and Manchester.

Local Enterprise Partnerships

What are LEPs?

Mr Osborne is looking to take £58bn of business support funding from central government and hand it over to LEPs.

LEPs are partnerships between local authorities and businesses which decide priorities for investment in local infrastructure. They offer business rates relief, simplified planning and some enhanced capital allowances and focus on innovation, SMEs and low carbon economy.

There are 24 enterprise zones across the country within the LEP boundaries.

Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP)

An enterprise zone designed to create an estimated £800m in business rates to borrow against, creating 40,000 new jobs, with uplift to be retained within the zone for a period of at least 25 years. The zone contains 26 development sites.

The GBSLEP comprises 1.3m sq metres of new floorspace, of which 700,000 sq metres is destined for business and financial services, digital media, ICT and creative industries.

Phase 1 will see the LEP borrow £128m against an expected uplift in business rates over first five years.

The figure includes £60m to help help unlock key developments such as the £500m Paradise Circus; £25m for the extension of the Metro from New Street to Centenary Square; and £40m to support site development and business growth activity.


Budget submissions

The Institution of Civil Engineers called for a delivery timeline for the top-40 priority projects and for government to prioritise action on finance and funding.

It also called for more detail on what is required from each infrastructure network in order to meet the government’s own goals.

The Federation of Master Builders wants a focus on energy-efficient house building and a “massive public-sector programme to improve the energy-efficiency of Britain’s existing 26m homes” to create 130,000 jobs and help cut carbon emissions.

The FMB also wants VAT to be cut from 20 per cent to 5 per cent on home renovation and repair.

The Civil Engineering Contractors Associationhas called for government to help unblock local projects, asking it to support to smaller projects that are struggling to move from the planning stage to delivery, accelerate UK Guarantees to new project starts and promote Funding for Lending scheme more aggressively.

The Construction Products Association said it is vital that government spending is rebalanced between current and capital investment, and extended from roads to Housing, schools and hospitals. Has also called for ring-fenced funding for local authorities and a level playing field across Europe for energy-intensive product manufacturers.

UK Contractors Group is calling for a boost to growth through local infrastructure investment; delivering the construction pipeline; short-term stimulus in areas such as R&M; and enabling institutional investment.


Construction’s verdict

Noble Francis, economics director at the CPA,said: “George Osborne has said on many occasions that construction is important to the economy but so far what we have heard is rhetoric.

“Capital investment is still falling 20 per cent and although he has made lots of big announcements of help for construction over the past couple of years, little, if anything, has been seen on the ground.

“This surely has to change in the budget.”

Stephen Ratcliffe, director of UK Contractors Group, said: “Conditions in the sector remain difficult, with latest ONS data showing construction output 9 per cent lower than a year ago.

“There is increasing cross-party recognition of the value of investing in construction, and the focus must now be on turning recent announcements into action on the ground.”

Alasdair Reisner, external affairs director at the Civil Engineering Contractors Association, said: “The clear message from industry is that 2013 must be the year of delivery.

“Since its election the government has rightly focused on the need to invest in growth through the creation of new infrastructure.

“We are particularly keen to see a focus on projects that open up new housing and commercial development in local communities throughout the UK.”

Dean Webster, chief executive, Sweett Group, said investors are now “looking to the regions to see where [money] can be spent”.

“I think we are starting to see more movement back in the regions now. UK debt is probably one area that worries me, in terms of whether it can trip us up. But that aside, I think conditions are becoming a bit more favourable.”

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