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Industry wary over health and schools boost

CONSTRUCTION'S RESPONSE to Chancellor Gordon Brown's comprehensive spending review was tempered by fears that capacity constraints and lengthy procurement processes could delay spending increases on health and education projects.

'This is a very welcome and significant chunk of spending but can the industry respond in time?' said EC Harris partner Graham Matthews.

'At the moment I don't think so. This is a big challenge for all of us, ' he said.

Increases in health spending will be 7% annually overall, with budgets reaching just over £92bn in 2007/8, a slight rise on previous projections.

Of this, direct capital spending will be £3.4bn in 2004/5 rising to £6.4bn in 2007/8.

An extra £2bn a year for 15 years has been committed to rebuilding England's schools through public private partnerships under the Building Schools for the Future programme.

This means money going into school buildings will be £5bn in 2004 rising to £7bn in 2007, a huge jump from the £800M budget of 1997/98 when the present administration was elected.

The Chancellor is expecting to see results from the extra cash as early as next year.

But new public private partnerships for schools are unlikely to start on site until 2006. This is because of the time it takes to set them up, coupled with the lengthy EU procurement process, Matthews said.

Contractor Carillion's business manager John Denning welcomed the schools and hospitals spending news. But he said he was awaiting more details from the Department of Health.

Mathews warned that capacity constraints could cause inflation as spending rose rapidly.

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