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No curb on investment

The credit crunch will not curb long term public investment in infrastructure, chancellor Alistair Darling told business leaders last week.

"It is essential that we do everything in our power to maintain stability [during the economic slowdown] and to support business and the wider economy," said Darling, speaking at business lobby group CBI’s annual dinner.

"But it is equally important that we should not be diverted from our long-term aim – to equip our country for the competitive challenge of the next decade and beyond."

Darling reiterated the Government's support for renewable energy and nuclear power, while promising to support the sciences by spending more on universities and skills.

"It comes at a cost, but it is essential," he added. "So too is investment in transport. Crossrail is vital for London and the UK and we need to spend more on rail. More will also need to be spent on road transport, and the need to provide more airport capacity remains essential."

His comments received a guarded welcome from across the industry. "The sentiment is good," said a Civil Engineering Contractors Association (CECA) spokesman, "but we actually need to see the investment coming through," he added.

Construction Products Association (CPA) economics director Noble Francis agreed, calling for a firm commitment to Crossrail spending, particularly in the wake of the 2012 Olympics, which will be the spike in the graph of the UK civil engineering sector/ activity. "This will be critical to the construction industry as a whole but to the infrastructure sector in particular," he said. The decline in private sector house building following the credit crunch could have a less foreseen knock-on effect.

Both the CPA and CECA were in agreement on the poor record of government transport infrastructure investment over the past decade but CECA’s latest survey of civil engineering workload trends, published this week, suggests that up until now contractors’ confidence in the sector had been bolstered by the strong performance of civil engineering in the preliminary siteworks for residential developments despite lower than expected investment in the transport sector.

This buoyant attitude is unlikely to last long in an environment where – according to Francis – first quarter 2008 house building statistics suggest a year-on-year decline of 28% on the first quarter 2007.

Housing starts for 2008 may reach only 157,000 against 193,000 new houses built in 2007. "This is going in the wrong direction for government projections of 240,000 a year being built by 2016," Francis pointed out.

In addition to problems with the house building sector, CECA’s workload survey shows that only contractors in the rail sector are experiencing strong levels of growth. "If the confidence of contractors is to be restored, then we need clarity in the traditional areas of work such as transport and water. Uncertainty needs to be removed in areas such as the Highways Agency’s Major Projects directorate," said a CECA spokesman.

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