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Government Recognises The Importance Of Construction To The Economy

Tuesday, 21st August, 2012

Weak demand in the construction industry is holding back the economic recovery, said the Federation of Master Builders (FMB) in response to this week’s news that the UK economy shrank again in the second quarter of 2012.

Brian Berry, Chief Executive of the FMB said:

"Once again, today’s GDP figures are not a surprise to small and medium sized businesses in the construction industry and the remainder of this year is, without doubt, looking gloomy. The latest industry forecasts predict construction output to fall by nearly 6% before 2014. Among our own members 47% reported a fall in enquiries in the three months to June.”

Berry continued:

“On the one hand we know the Government recognises the importance of construction to the economy. Officials know that every £1 invested in construction generates £2.84 in total economic activity. But on the other hand, the initiatives coming through from government are not enough to offset the deep cuts in public spending."

Berry concluded:

"The private sector is not leading the economic recovery in the way the Government hoped. Therefore, 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.”

This stance was echoed by Scottish Building Federation Chief Executive Michael Levack who 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.”


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