Where’s the growth?

Turn to the business pages - and increasingly the front pages - of any broadsheet newspaper at the moment and there’s no doubt what’s top of the agenda: economic growth. Or more specifically, the lack of it.

From the spectre of a Greek default and its ejection from the euro, to the latest high street sales, growth is the key to ensuring a sticky economic situation doesn’t turn in to a lost decade of depression. It’s why this month’s latest industry contract figures, showing a surprise spurt in activity, are so welcome.

And as you’d expect, growth has been at the forefront of the construction industry’s collective mind this week as the annual round of intensive lobbying and special pleading reached its peak in advance of the 21 March Budget. While the industry has been - and remains - broadly supportive of the government’s stance on spending austerity, the question marks over its strategy for growth remain. Until now the government’s focus on infrastructure, with a £30bn package announced in the autumn, has been seen as a welcome sign of its plan to promote growth through capital investment. But as the Institution of Civil Engineers pointed out in its Budget submission, that plan hasn’t yet been put into action.

There are a number of vital problems that are holding back its execution. First, there are serious obstacles to pension funds being used for infrastructure investment, and it looks unlikely that these will be overcome any time soon. And at the same time the government has, in effect, decided to take PFI, one potential source of funding, out of the picture.

Second, even if money does come forward, any investment in infrastructure will take a very long time to turn into spades in the ground. Projects such as HS2, earmarked to start on site in 2017, don’t reach the construction stage overnight. Even roads and other smaller infrastructure schemes take years in the planning. Just how much longer can struggling contractors and consultants hold their breath for work to come through?

The previous government realised that building homes was the quickest way to get the construction industry working again, so it focused its £1.5bn stimulus there. That kind of cash simply isn’t available today. But it’s why one of the Construction Products Association’s suggestions is so interesting. It proposes that the Bank of England use its asset purchase programme (otherwise known as quantitative easing, or, to anyone outside banking, printing money) to buy bonds in a company that builds new homes. The CPA idea would see an existing method of economic stimulus adapted so as to get construction activity going quickly - not merely supporting the banks’ balance sheets.

It’s the kind of idea that the government should be exploring with verve. Because unless some stronger and immediate action is seen from this government, contractors and consultants will simply have to look ever further overseas for work.