Building sector to `miss out'

BY THOMAS BLARD

AND TOM STEVENSON

The construction sector, already suffering from wafer-thin margins and overcapacity was dealt another blow yesterday as figures from Cambridge Econometrics suggested the industry will continue to miss out on economic and investment recovery.

According to the independent research group, total construction output will underperform the economy as a whole with long-term output growth of about 2 per cent lagging expected growth in GDP of 2.4 per cent between 1997 and 2002.

The group blamed slow work in the private housing sector thanks to interest rate rises and further cuts in Miras interest relief. In the commercial area declining orders from electricity and water companies, less roadbuilding and the completion of the Jubilee Line would result in a forecast 1 per cent decline in infrastructure work.

In the short term, growth in output is expected to slow even further in 1995 from the anaemic growth of 1994.

Construction output in 1994 grew by 2.5 per cent and is expected to increase by only 1.7 per cent this year.

Despite a relatively strong upturn in investment plans for the economy as a whole, construction is expected to suffer from a concentration on productivity-enhancing expenditure such as information technology rather than buildings.

The findings echoed the comments yesterday of Sir Robin Biggam, chairman of cables and construction group BICC, who said the prospects for British contracting remained extremely difficult. He blamed the industry's overcapacity in part for the decision to slash BICC's full- year dividend.