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'General Deception' inflames merchant sector

Published:  26 May, 2010

UK: Now that the General Election is over, the dust has settled on the merchant sector and concerns are starting to emerge. Mike Leonard of Get Britain Building – the UK's biggest coalition of companies and organisations associated with the built environment – is uneasy because he fears that the new Government, like its predecessors, will fail to recognise the building industry for the economic powerhouse it is.

"No matter how many hospitals, community centres and DIY retailers our politicians visited, or how many speeches were delivered on a pile of pallets, I strongly suspect that the vast majority of electors were not taken in.

"Around 10.5 million people have either given up looking for work or are desperately looking for proper jobs. With public sector employment likely to be hit hard over the coming months, we have some major challenges ahead. Already the unions are flexing their muscles and a summer of discontent seems a distinct possibility."

Wealth creation and jobs are the key elements of a sustainable future, said the Get Britain Building coalition.

The production of building materials is one of last great manufacturing industries in the UK - more so than the motor sector. "The construction sector has always been an engine for job creation, whether in manufacturing, distribution, merchanting and installation. Not to mention the 'hinterland' or halo of wider economic benefits arising from a vibrant building industry," said Mr Leonard.

"We need to make things in volume in the UK rather than simply continuing the trend of closing down manufacturing capacity in favour of the importation of goods from the lower cost labour markets.

"As Get Britain Building has been saying since its inception, the time is long overdue for the Government to acknowledge and underwrite the significance of construction to the UK economy. Similarly, it must realise the enormous opportunity that we provide to help drive all of us out of recession.

"In the merchant sector, up to 12 000 people have lost their jobs in the past 18 months.

Consequently, it is still impossible to comprehend why the building industry – which represents 9% of GDP and employs approximately seven million people – is ignored by government when it comes to stimulus packages, not counting the the boiler scrappage scheme."

By contrast, the car industry – that accounts for 0.8% of GDP and employs almost as half as many people as building – attracts huge sums of support, a large chunk of which has ended up in the pockets of foreign manufacturers.

"It has now been proved – following the Cut the VAT Coalition's report in February – that slashing VAT for housing repair, maintenance and improvement (RMI), even just on the labour element alone, would be an important first step in creating new jobs, freeing up money for improving and bringing 'old' housing stock back into use; and in assisting the Government to meet its near-impossible 2020 and 2050 carbon reduction commitments.

"Government is going to have to start t hinking differently if we are to work and earn our way out of the current crisis. The UK building industry is well set to be the motor of economic recovery.

"Come on government: it's time to step up  and do what is right for the UK by protecting and investing in what is left of our manufacturing heritage and  putting in place the planning  and funding to Get Britain Building!"

The Forum of Private Business has given a cautious welcome to the appointment of David Cameron as Prime Minister and the coalition government.

Forum chief executive Phil Orford said: "Smaller firms urgently need some degree of certainty so they can begin to plan for the future. Hopefully, Mr Cameron's appointment will herald the beginning of a workable government which will ensure economic stability and give smaller firms the confidence to aspire and grow."

Mr Orford added: "It is imperative that our MPs put aside point-scoring and work together to make Britain a stable and prosperous place to run a business."

Recent Forum research found that almost 70% of small business owners were already finding it difficult to plan for 2010, even before the results of the General Election.

The Forum has already set out what it thinks the priorities for the new Government should be in its election manifesto, which has been circulated among prospective MPs and policymakers.

Those priorities are:

• Free enterprise – the Forum believes that the greatest drivers of growth in the UK economy will come from small businesses, with new ideas borne in rapidly changing sectors and developed at a speed that traditional models of government spending will not have the agility to support.

• Fiscal responsibility – securing the UK's reputation as a good place to do business will mean bringing Britain's finances under control. That will mean a combination of smart taxation and smarter cuts to public spending.

• Stability – any drastic cuts to government programmes and initiatives should be balanced out with the need to alleviate the damage of the recession.

• New technologies, new markets – as new technologies develop and new markets open, there should be equal opportunities for small businesses to develop new business models in innovative ways.

Against the current political background, public sector capital expenditure programmes are likely to be regarded as a relatively easy target. Construction-related areas, from the Building Schools for the Future programme to Crossrail will be vulnerable to both explicit spending cuts and to cuts by stealth as protracted policy reviews push back planned spending.

The Conservative Party has argued for effective action to cut public spending and tackle the budget deficit in order to reassure financial markets and nurture a private sector lead recovery.

A minority Government will have to demonstrate to financial markets that it is able to deliver the promised overall reduction in the budget deficit.

There is a risk that continued political uncertainty could undermine consumer and business confidence and hamper the pace of economic recovery.

There have already been tentative signs that the upturn in the housing market faltered ahead of the General Election. There is a risk that political indecision will be replicated in the housing market, dampening the anticipated recovery in new housing activity over the next 12 months.

Build the UK's future and invest in construction, said Chris Blythe, chief executive of the Chartered Institute of Building. "There has to be a sense of optimism that the political differences between the parties can be harnessed for real progress, and not used as a weapon against change. Strong leadership and strong partnerships will be needed.

"What is clear is that if we are to go back to a pattern of consistent economic growth, there needs to be a sustained programme of national investment. The physical infrastructure of this country underpins the entire economic and social infrastructure.

"Investment in the built environment can spread the benefits of an economic stimulus to all parts of the UK. For every £1 spent on construction output, £2.84 is generated in total economic activity, and 92p of every £1 spent on construction is retained in the UK.

"We believe there are some positive noises around the skills agenda and in particular apprenticeships and graduates.

"The last recession taught us that if we neglect training and educating our workforces we will suffer in the long-term; and hinder our ability to react to any upturn in the economy. There is also a huge opportunity to develop the low carbon skills that the industry needs to meet the green agenda.

"Unlike the debates, this government's success will be measured by its ability to turn the words into substance."

"My number one wish, to be delivered at all costs is, whichever colour of government we have, they need to sort out the CERT legislation," said John Sinfield, managing director of Knauf Insulation.

"The current CERT scheme ends in March 2011. Consultation was put out at the beginning of 2010 as an extension to bridge the gap between CERT and the Home Energy Management Strategy, which deals with all hard-to-treat properties and also goes wider in terms of smart metering.

"The consultation has closed, but unfortunately, didn't go before ministers prior to the break-up of Parliament. So, now it is being worked on by the civil service. It is on every parties' agenda but, if we have a hung Parliament, environmental strategies will not be top of the list.

"If it is not laid before government prior to the summer recess, there is huge level of uncertainty as to what will happen from 1 April 2011 onwards.

"This will hurt funding to installers and that will flush back through to builders' merchants and the distributors and their customers," he explained.

"In terms of green issues, I would like to have a clear definition of what 'zero carbon' is. To achieve this target by 2016 sounds fantastic, if we don't know what zero carbon means how can we work towards it?

"I'd like to see a reduced rate of VAT on home improvements.

"What frustrates me is that the construction industry cannot speak with one voice. We are bigger than the airline or the automotive industry. Yet, as soon as there is a problem, the automotive industry speaks with one voice and gets the car scrappage scheme. We got the boiler scrappage scheme, but only after a huge amount of work and for only a small amount of money and for only one sector of our industry.

"A pound spent in construction is a pound spent on this country, because most of the workers pay their taxes in the UK. The vast majority of products are manufactured or reworked in this country. That is a good way of stimulating our economy.

"Under Pay-as-you-Save, if homeowners do green upgrades, they can receive money off their council tax. The Government should stimulate the renovation of our existing building stock because there are a lot more opportunities in that sector than there are in newbuild.

"Get Britain Building is great because we have the trade bodies and the building materials manufacturers and the Construction Products Association behind it. We are such a diverse industry. What about the housebuilders, the contractors, the architects and the major clients? We need someone to engage them all so that we speak with one voice.

"If we put VAT on RMI at 7.5%, that will do nothing for the major housebuilders. They could even argue against it as it will mean less people moving in favour of improving...

"The whole point of the car scrappage scheme was to stop car manufacturing jobs being lost. How many people have we lost in construction since the credit crunch and the recession began. Every building materials manufacturer, housebuilders, builders' merchants have all shed people. But nobody cares, because we don't speak with one voice.

"We need a 'big' industry figure to get BMF, CPA, HBF, the major contractors' group and clients' group all in the same room and let's put together a manifesto to move the construction industry forward.

"A construction manifesto should cover clients, major contractors and the supply chain. We all know public sector spending will be cut after the election. It is only a matter of where, when and how deep," he predicted.

"We need a strong figurehead and someone who has credibility with government to talk to construction advisor Paul Morrell and say: 'I'm speaking on behalf of the multi-billion pound construction industry in this country and this is what we think you should be doing, government'. We have to get the ear of government."

"How quickly things change in the political world," commented Andrew Cope, managing director of Chandlers Builders' Merchants.

"Government needs to cut the bureaucratic burden. It must have a clear and realistic economic strategy that is followed through.

"The Government must also recognise the role and importance of medium-sized businesses within the economy. In so doing, it must acknowledge that it must no longer be able to enjoy the benefits and reliefs offered to small businesses than it is to exploit the opportunities of scale and size enjoyed by large multinational PLCs.

"The current situation too often leaves medium-sized businesses shouldering the same burdens of taxation and bureaucracy as larger businesses and, at a significantly higher net cost."

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