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'Spend £1bn on construction for 32,000 jobs', new research reveals

Chancellor told ‘shovel-ready’ projects would bring quick wins as regional analysis quantifies benefits

The construction industry has stepped up its case for investment this week with the first region-by-region analysis of the economic benefits it brings.

Research commissioned by the UK Contractors Group shows local economies retain on average about 90 per cent of the economic benefit from construction.

The figures will be used in an industry-wide campaign to influence central and local government, MPs and Local Enterprise Partnerships to help them recognise the value of getting projects off the ground.

The research builds on work by strategy firm LEK Consulting two years ago, which showed that for every £1 of spent on construction, the wider economic impact was £2.84 for the UK economy. This ‘multiplier effect’ has been widely and effectively used to lobby for investment and attention by government. 

The UKCG is now able to show that between 88 and 95 per cent of that impact is retained by the regional economy where the work takes place.

The researchers estimated that a £1 billion spent on construction would create 32,000 jobs locally. UKCG chairman James Wates said: “Would £1 billion investment in the automotive sector produce the same number of jobs? I would guess not.”

UKCG director Stephen Ratcliffe said the research, by the Centre for Economics and Business Research and business intelligence unit glenigan, was designed for the whole industry to use. The government’s localism policies meant more and more decisions would be taken at a local level, he said.

“We want to give everybody in this industry a story to take to their contacts in national government and also in the regions.”

This week, the CBI cut its GDP growth forecasts for 2011 to 0.9 per cent down from 1.3 per cent.

The report came a week after the Prime Minister David Cameron promised to kick-start construction, saying the government would “unblock” funding and planning decisions that were holding up work (news, page 2, 3 November).

He said further details would be revealed in the Chancellor’s autumn statement on 29 November.

The UKCG’s submission to the Chancellor ahead of the autumn statement emphasises the industry’s “multiplier effect” and the fact that construction investment retains jobs locally, Mr Ratcliffe said. Its letter said: “The construction sector can make a material and substantive difference to key economic and social indicators in the UK.”

James Wates, who is deputy chairman of Wates and vice-president of the CBI Construction Council, said the government should use existing public sector construction frameworks to get projects going as quickly as possible. “Rather than pull up the plant by the roots we have got to manage it so that we are getting the best from it,” he said.

He also encouraged construction firms to get involved with LEPs, organisations which include local businesses and councils which are designed to produce economic plans.

“There are a number of LEPs with construction representation trying to demonstrate that local investment can have a big impact.”

Glenigan economics director Allan Wilen said: “The report makes a valuable case for construction investment at a regional level. Local finance [of construction] does not dissipate out to the other parts of the UK.”

Mr Ratcliffe said the UKCG would be running a regional lobbying campaign that went beyond the autumn statement.

The research reveals which local economies were hardest hit by the downturn in construction. The economic benefit of spending on construction in the North-east fell by 23.4 per cent between 2007 and 2010 from £3 billion to £2.3bn, while in London and Scotland the fall was 2.2 per cent.

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