Move into maintenance?

On Tuesday the Chancellor’s Autumn Statement set out the scale of the challenge facing the British economy over the next decade. Growth forecasts have been downgraded, the budget will not be balanced by the time of the next election, we face at least six more years of big spending cuts and as if that isn’t bad enough, further deterioration in the Eurozone would threaten any recovery.

Exactly a week before George Osborne stood up in the House of Commons, I was sitting in the Building Centre, off Tottenham Court Road, at the Construction Industry Council’s regular Economic and Policy Forum.

We heard from the Bank of England on the macro-economic situation and from the Construction Products Association (CPA) on the sectoral impact of the recession and the outlook for the next five years – it wasn’t a fun-filled few hours.

The Bank’s most recent analysis showed that, although pre-recession growth was actually better than previously calculated, the lowest point of the trough was comparable to the situation in the 1930s.

Even before the OBR’s forecast of another 200,000 job cuts, the public sector employment trend has not been following its projection of a gradual decline to around 5.3m by 2016 but has tracked sharply down. Half a million private sector jobs have been added since the depths of the recession but there is a long way to go.

There was not much in the Autumn Statement to cheer those in the construction and FM sectors. Government investment in infrastructure made for a few headlines but £5bn over three years is less than 0.1% of GDP per annum. The pension funds may respond but will need some persuading.

The missed opportunity is investment in the green economy and some recent decisions, on feed in tariffs and planning for example, suggest that the Government is stepping back from its commitment to protect the environment. The flagship Green Deal has been met with scepticism, particularly as it might apply to the commercial sector.

According to the CPA, the 73,000 houses started in 2009, represent the lowest figure (excluding the war) since 1923. Public housing appears to be off the agenda, set to fall from 30,000 starts in 2010 to just over 19,000 in 2013. With 267,000 new households created each year, we have a housing gap of well over half a million in 2011-15.

So, is there a glimmer of hope anywhere? Well, maybe if you run a maintenance business.

The theme running through the CPA’s presentation was that the pressure on capital programmes and a backlog of work should boost maintenance across schools, hospitals, roads and even public housing.

Capital expenditure on education is set to fall from £7.3bn in 2010/11 to £3.3bn in 2013/14. The focus will be on finishing off projects under the Building Schools for the Future programme and Academies. But, says the CPA, don’t underestimate the maintenance workload as schools put off work in anticipation of BSF funding.

From 2013 onwards the CPA suggests that DCLG will need to increase funding to deal with the maintenance backlog in public housing.

It’s a similar picture in healthcare – as we come to the end of a period of investment in major hospitals, the emphasis will be on medium-sized hospitals, GP clinics, IT and … maintenance.

Even so, with confidence in short supply, it might take a leap of faith for companies to invest in the systems, training and infrastructure required to meet this anticipated demand.

Much has been written about the different attitudes of the British and our continental European cousins to home ownership. But with higher deposits demanded from first time buyers and house price deflation perhaps people will start to view the roof over their head differently.

During an interesting discussion at the CIC Forum, there was just a hint that we could see a market develop for well-built and importantly, well-managed residential property to let.