February 2010 – No time to turn the taps off
The recession might not be quite over, but there seems to be agreement that at least an end to the worst is in sight. With financial meltdown averted and the huge stimulus given to economies by governments across the world seeming to have worked, attention now switches to when those taps can be safely turned off. Not yet, is the clear message from construction.
One confident voice that has been raised recently is that of Corus Chief Executive Kirby Adams, who was profiled in the Financial Times on 28 December and captured headlines with a call for government to boost investment in construction to drive the economy convincingly out of recession. But all the auguries point towards cuts in public sector investment over the coming years as the UK grapples with its large public sector debt; so any calls that can at least help counteract cuts as a solution to the economy’s ills are more than welcome.
The UK’s public sector debt as a percentage of gross national product isn’t high by international standards, although it has grown faster in recent years – starting from a relatively low base – than others. So Mr Adams is right in suggesting that the UK has leeway to strike a balance between cutting debt and investing that doesn’t devastate the construction industry. At least some key sectors for steel construction like health and schools look like escaping the axe, but others are more vulnerable.
Mr Adams said he was sure the first steps towards recovery had been taken in the steel manufacturing industry; demand is forecast to rise by 8% across Europe this year. This follows a 30% fall last year however, and construction is unlikely to lead the recovery. But it still looks like the corner might have been, or is shortly to be, turned.
This will have been done with very little direct government support for industry, as Mr Adams stressed when he called for government help for manufacturing generally. There is a lack of a coherent industrial strategy that would make the UK more attractive for manufacturers which needs to be addressed, he said. A healthy manufacturing sector would be good for construction. Many of the construction industry’s clients as well as leading construction materials suppliers could be helped if even a fraction of the £76,000 million that has been used to support banks was used to rebuild the country’s manufacturing base.
Whichever political party wins this year’s general election will face tough choices, but support for the rebuilding of the UK’s manufacturing base and investing in infrastructure, as the Corus chief says, has to find a way into any coherent plan for the future of a successful modern economy.