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Construction: Government Assistance

Business, Innovation and Skills written question – answered on 9th November 2009.

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Photo of Peter Ainsworth Peter Ainsworth Conservative, East Surrey

To ask the Minister of State, Department for Business, Innovation and Skills

(1) what financial support the Government have offered to the construction industry during the current economic downturn; and if he will make a statement;

(2) what recent assessment he has made of the contribution of the construction industry to the economy; and if he will make a statement;

(3) what steps the Government are taking to support the construction industry; and if he will make a statement.

Photo of Ian Lucas Ian Lucas Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Business and Regulatory Reform)

The Government recognise the importance of the Construction Industry to the economy. In 2007 the construction industry, including contracting, products and services, accounted for 9 per cent. of GVA. Construction contracting by itself contributed 6 per cent. of GVA. These figures are based on the Annual Business inquiry published by ONS in June 2009, which are the latest data source the Department has at hand. The public sector is especially important to the construction industry. Some 30 per cent. of all construction work is procured by the public sector, rising to 40 per cent. if PFI projects are included.

In order to help preserve jobs and skills, at the time of the 2008 pre-Budget report the Government announced that it was bringing forward £3 billion of capital expenditure from financial year 2010-11 to financial years 2008-09 and 2009-10, to be spent on motorways, schools, GPs' surgeries, flood defences and improving the energy efficiency of the existing housing stock.

In addition, in the Budget the Chancellor announced a £600 million cash injection for the housing market to help kick-start stalled projects and to build more energy efficient homes, including £50 million to modernise armed forces' accommodation.

The Construction Industry like other sectors has benefited from the Government's recapitalisation of the banks and the restoration of stability to the financial sector. The UK is the first country in the world to have negotiated legally binding lending commitments with banks receiving state support, and both RBS and the Lloyd's Banking Group have committed to additional net lending over the next 12 months.

The Construction Industry is dominated by Small and Medium Sized Enterprises. Like other sectors of the economy, the industry has benefited from the Government's "Real Help for Business Now" initiative, including:

The Enterprise Finance Guarantee Scheme: enabling banks to lend an extra £1.3 billion to small and medium-sized businesses with viable business plans that can not access normal commercial lending;

Extra lending capacity: made available through the European Investment Bank;

The Working Capital Scheme: provides guarantees to banks for existing business lending, so freeing up more capital for new loans;

Up to six months' Trade Credit Insurance Top-Up, backed by the Government and available for businesses where cover has been reduced due to the recession.

The Government would shortly appoint a Chief Construction Adviser to lead the low carbon review of the Construction Industry to ensure the industry is "fit for purpose" for delivering a low carbon future. The Chief Construction Adviser will also chair a new Construction Category Board, which will build on the work of the existing Public Sector Construction Clients Forum, to oversee the implementation and further the development of best value in Government construction procurement.

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