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UKCG pledges to fight against spending cuts

The UK Construction Group has pledged to use a report proving the value of spending on construction to fight the industry’s case before and after the next general election.

A UKCG-commissioned report published by economists LEK this week shows that the economy benefits by a total of £2.84 for every £1 spent on construction. The industry’s long and largely domestic supply chain makes it one of the most profitable places for a government to place stimulus cash.

UKCG director Stephen Ratcliffe said the industry had lost out too often to other sectors, and that the report was a crucial weapon in the battle to redress the balance. The trade body is meeting with senior figures at all three major political parties to press construction’s case for protection when public debt is tackled next year.

Mr Ratcliffe told Construction News: “There is an increasingly rigorous debate about public spending and we fear that whoever is in government after the next election will be tempted to take the easy way out and cut capital spending.

“This research shows that if construction spending is cut even more then there will be carnage. We will be taking the report to senior political figures including business secretary Peter Mandelson, Liberal Democrat shadow chancellor Vince Cable and Conservative Party chairman Francis Maude.”

The CBI has also pledged to use the report’s findings in discussions with the party leaders, said Mr Ratcliffe.

The LEK report, Construction in the UK Economy, sets out clearly the economic argument for investing in the sector. It says that the industry contributed 8.5 per cent of GDP in 2008, and employed about 8 per cent of the UK workforce.

The construction industry spent £28.7 billion in 2007 buying things from other sectors, stimulating demand for materials, finance and machinery among others.

This supply chain means it has the third highest direct output in the UK, calculated at £2.09 for every £1 spent on it. Only the railway transport and health/veterinary service sectors create more overall output.

An extra 75 pence of output is created by construction industry workers spending their wages, giving the sector a total indirect output of £2.84 for every £1 spent on it.

The report also highlights the high level of redundancies in the construction industry in the last couple of years. About 28 in 1,000 workers in the industry have been made redundant during the recession.

This is 40 per cent higher than manufacturing and 50 per cent higher than financial intermediation and business services

The report concludes:  “Government investment in construction is the most beneficial use of stimulative public expenditure in both the short and longer term, and any reduction in construction expenditure would have significant, immediate and enduring negative consequences for the UK.”