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Industry suffering in summer of cuts

Construction firms are already being hit hard by public sector spending cuts and expect the autumn to bring further damage to their businesses, according to a poll by Construction News.

More than half of the respondents to a survey carried out over the past two weeks said business was quieter than usual this summer.

Three in 10 said that the public spending cuts announced by the government were a ‘disaster’ and were ‘putting jobs on the line’.

Only one respondent said their business would be completely unaffected by the Comprehensive Spending Review that will be announced on 20 October.

Exactly half of those surveyed suggested that the spending review would have a significant effect and lead to redundancies.

One respondent said that even those with little exposure to the public sector would feel the effects of reductions in spending.

They said: “Our company is not highly reliant on the public sector but will face even stiffer competition from those who are.

“Rates are already on their knees and further competition will wreak havoc among already struggling contractors.”

Public spending cuts were identified as the joint-biggest threat to the UK construction industry, along with economic conditions stifling the commercial recovery.

Just five respondents said that the lack of incentives for councils to approve development plans would have the most detrimental effect on contractors.

One respondent said: “We have a perfect storm in construction - total inertia from lenders and planners and no spending in health, housing or education.”

Another said: “Building residential developments has only just picked up again. Things are very tight in the industry - lose one project and we go back into consultation for redundancies.”

One participant expressed fears that their company would not survive the recent swathe of cuts to the Building Schools for the Future programme, given its reliance on work in the schools sector.

Civils schemes, many of which are awaiting funding decisions in the autumn, were raised as a concern by another respondent, given their company’s dependence on the public purse.

Several participants said they were concerned about rising unemployment and decreasing tax revenues from further falls in construction work.

One even suggested this could be a factor in slowing or reversing the UK’s economic recovery.

The government is to announce the results of its spending review on 20 October. The review will set spending limits for every government department for the period 2011/12 to 2014/15.

The scale of cuts announced by the government in the June Budget could see capital spending reduced by £123 billion over the next seven years compared with what it would be if current levels were maintained, according to research carried out by CNinsight.