Despite the trepidation with which the spending review has been awaited the sky has not ‘fallen in’ for the industry as a whole, says Grant Thornton construction partner Kathryn Hiddleston.
On a positive note, the Government intends to increase the existing levels of capital spend by £2.3bn a year to 2014/15 to fund projects with long-term economic value. This includes over £10bn on nationwide high value transport maintenance and investment and more than £14bn for Network Rail investment. This is good news for the large scale civil contractors.
Changes to social housing so that new tenants will pay 80% of market rents will help fund the development of 150,000 of new social homes over the next four years. Welcome news for a beleaguered house building market.
However, where the Government gives with one hand it can take away with the other. The Government wants to devolve significant financial control to local authorities and - despite pledging to maintain significant funding for schools and hospitals - it is requiring local government to achieve savings year on year of 7.5% over the next four year at the same time as freezing Council Tax for 2011/12. All this will undoubtedly have a draconian effect on the number and value of projects available for regional builders.
On a really positive note Osborne announced an increase in the funding for adult apprenticeships by £250M a year by 2014/15. It is to be hoped that a large proportion of this will be directed towards developing skills for the construction industry.
In conclusion, potential winners are the large scale civil contractors and social housing developers but the medium to small regional outfit may find that competition becomes even more keen for an ever-decreasing share of local council spend.