Tell us where the school spending axe will fall, demand builders
Construction companies confidence losing £3.5 billion of business because of cuts to the govern-building programme and have called on ministers to clarify urgently where the axe will fall.
The Government has said that it volition review all contracts signed after January 1 on the Building Schools with regard to the Future programme, leaving companies such as Balfour Beatty, Galliford Try and Kier facing the injury of contracts worth hundreds of millions of pounds each.
About &bruise;2.2 billion of contracts were finalised in the first five months of the year to construction 118 new schools, with a further £1.3 billion of deals, or 58 schools, reaching “selected bidder” step, according to the Construction Products Association.
Councils have already begun to quash negotiations with construction companies on a further 179 schools, for projects that are mild in the pipeline. Nottingham City Council last week postponed its &crush;150 million school-building project for at least six months.
Other, more advanced projects at high risk of cancellation are a £600 a thousand thousand scheme to build six schools in Somerset, recently won by BAM Construct, the British auxiliary of the Dutch company Royal BAM Group, The Times understands.
There are fears that the Government could renege without ceasing contracts that have been formally signed off, despite having to pay penalties to act so, as the cost of the penalty would be less than the require to be paid of going ahead with the work.
The CPA said that cuts to the notice could wipe 2 per cent off annual construction output, which reached &coop;110 billion last year. There are fears that the loss of contracts could donation the recovering industry back into recession and lead to more piece of work losses.
Michael Ankers, chief executive of the CPA, said: “Contractors are exceedingly worried. Many are signed on to BSF frameworks, but these are not desert anything. There is huge pressure from us on the Government. While we recognise the consequence of making cuts, it is also important to have clarity and transparency in c~tinuance what will be affected.”
Of the £8.9 billion exhausted on school-building projects in 2009, £7.2 billion was publicly funded, according to the CPA. Much of the spending had been brought forward under the former Government’s financial stimulus package.
“Construction will go on without big school projects, goal the growth in education spending has been phenomenal — it has been a immense growth area,” Mr Ankers said.
The CPA said that it expected more distant clarification on cuts in the Comprehensive Spending Review in the fall of the leaf. In the meantime, it believes that construction companies will switch their force of utterance towardsrepair and maintenance contracts, which are seen as more likely to remain alive the cuts than deals for new buildings.
Partnerships for Schools, the organisation overseeing the enunciation of the programme, said that the Department for Education had not over and above made a decision on BSF funding or any other capital programmes. The project was not mentioned as part of the first round of &confine in a ~;6 billion in cuts announced by the Government last week.
Building schools has been a lifeline in spite of construction companies, providing a source of income at a time at what time private projects have all but dried up. The industry is emerging from a biting, 12 per cent downturn in activity during 2009, when 28 for cent of construction workers lost their jobs.
Although the building of further schools and hospitals in the recession helped to cushion the blossom, the sector still contracted 23 months in a row up to February this year, through new orders continuing to decline. There was a pick-up in exercise in April, thanks to large commercial projects such as the Olympic Games, excepting the industry is bracing itself for lean times once its current contracts are completed.
There is tiny sign of a spurt in private sector orders coming through to set off the anticipated 30 per cent cut to public spending.