Government cuts pose construction jobs threat
The world’s biggest cement makers have warned that plans to halve investment in English road building will force job losses and plant closures across the construction industry.
The Highways Agency, which is charged with developing and maintaining England’s road network, will cut spending by 44 per cent during the next three years as the government looks to rein in capital spending on all but essential construction projects.
The move by the building industry’s largest customer would see capital expenditure – the majority of which goes on construction projects – drop from £1.6bn in the 12 months to March to £922m by 2014 and is expected to pose a serious threat to the sector’s recovery.
“Building materials companies have already experienced a 35 per cent drop in demand for our products, but with the pipeline of work from the Highways Agency drying up it is going to be a lot tougher,” said John Bowater, finance director at construction materials firm, Aggregate Industries.
“It hasn’t been this tough since the late 1980s and the industry is having to adjust,” Mr Bowater said, adding that Aggregate Industries, the UK arm of Switzerland’s Holcim, the world’s largest cement maker by revenues, had started reviewing its capacity and production facilities in light of the falling demand.
Other companies in the sector have made similar adjustments, with production at cement works, asphalt plants and quarries being slowed and, in some cases, mothballed.
Simon Vivian, chief executive of Breedon Aggregates, the largest independent UK materials producer, said that the cuts would create “two very lean years”.
“It is going to be a bit of a shock to the system for the industry, but there have been some huge projects during the past few years, like the widening of the M25 motorway, so we are coming off a fairly high level,” Mr Vivian added.
So-called heavy-side material companies, which produce basic building products, such as concrete, have suffered more than other areas of the building products sector during the downturn. Their wares are cheap and heavy, making it uneconomical to transport further than about 30 miles from the point of production.
The Construction Products Association, the building industry’s main trade body, said the cuts to Highways Agency spending were “extremely disappointing considering the World Economic Forum has ranked the UK 35th in the world for the quality of road infrastructure”.
“Roads would be an ideal area in which funding could be brought forward and private investment encouraged in order to stimulate activity through putting vital projects back on the agenda without placing an additional burden on constrained government finances,” said Noble Francis, economics director at the CPA.
The Highways Agency said it was committed to “achieving the efficiency savings expected of us in the current fiscal climate and we are determined to work with our supply chain to make best use of available funding and to maximise the number of schemes delivered”.