Watts Bulletin

Editorial

Issue 123 - July 2010

Welcome to the July issue of Watts Bulletin. As this issue of the Bulletin goes to press, the new coalition Government has been in power for two months and the reality of the new austerity approach to our public finances is beginning to bite. In this issue we look at the implications of the Emergency Budget and detail the new approach to the schools building programme. We also report on the latest BREEAM assessment method – this time for datacentres – and point readers in the direction of new guidance on managing and eradicating asbestos in buildings.

RICS highlights full value of construction to economy

Watts Bulletin (Issue 123)

Government cuts that threaten capital spending will have a knock-on effect on the wider economy at a rate of almost three to one, according to recent estimates.

July 2010 cover image

The RICS, along with other industry bodies, has welcomed the Government's pledge not to reduce capital spending beyond the cuts announced in the March budget. “The construction industry is a powerful engine of growth, and we had emphasised in our emergency budget submission that any further cuts in capital spending would have undermined the tentative economic recovery,” says RICS.

The organisation highlights recent estimates that put the size of the construction sector's multiplier at £2.84 – which is one of the highest multiplier effects in any sector of the economy. This means that for every £1 spent on construction output, an additional £2.84 of total economic activity is generated.

This is thought to be a result of:

  • the sector's relatively low level of imports;
  • construction’s heavy reliance on an extended and varied supply chain; and
  • its relatively high labour intensity.

It also implies that every £1 cut from the capital spending budget would have prevented an additional £2.84 of total economic activity that would have otherwise taken place.

Despite the Government’s decision not to reduce capital spending further than planned in the March Budget, the fact that a number of significant projects will not now go ahead due to the different priorities of the coalition Government, means that there will undoubtedly be repercussions for local economies in some areas. The combination of raising the rate of Capital Gains Tax and VAT are also likely to limit growth and mean fewer jobs in the property and construction sectors. However, according to Mark Goodwin, RICS Director of External Affairs, “Despite expected cuts to the public sector, regional property markets may get some help from labour market initiatives to reduce the start-up costs of hiring employees. This may be especially helpful for smaller enterprises”.

For more information and a detailed review of the implications for property of the recent Emergency Budget, go to www.rics.org

Watts Pocket Handbook

The Watts Bulletin is the technical companion to the Watts Pocket Handbook, the essential guide to property and construction, as used by professionals since 1983.

Watts Bulletin editor: Trevor Rushton.

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