Friday, 2 September 2011

Not Building on Osbournomics

The Office for National Statistics reported that orders for the construction industry was 23% down on the same quarter a year ago, this fall is the sharpest fall since 1980. This fall in orders is truly shocking.

Areas in the south and west were hardest hit – with north London, Bristol and the Medway in Kent suffering some of the largest falls.

Employment in the construction sector has fallen for the last three months. The Construction sector is working with increasingly lower margins and confidence at its lowest for eight months.

Howard Archer, chief UK economist at IHS Global Insight, said "While the purchasing managers' survey does at least indicate that construction activity is still expanding, it shows output growth slowing, incoming new business at a seven-month low, employment in the sector contracting at an increased rate, squeezed margins and business expectations deteriorating. Meanwhile, the data from the ONS is horrible. This bodes ill for output prospects in the near term at least."

It is time for the government to act. This spiral of stagnant growth has to be broken, it is time for action.

The Labour party has called for short-term tax cuts to promote growth and prevent the economy slipping back into recession.

The government needs to revisit it's cuts to infrastructure projects, whilst private sector housebuilding remains muted the government could use a windfall tax on bankers to fund public sector housing and a VAT cut to boost consumption this would boost demand for building retail outlets and shopping centres as these have almost ground to a halt. These would raise tax revenues and lower the deficit.

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