Private finance stuck in a lay-by

The warning from Williams Holdings that second-half growth would be hit by difficult trading in European and American building products markets is the latest gloomy prognosis from a battered industry. Recovery, what recovery?, remains the cry from the men in hard hats. With more job losses expected to be announced in the autumn, construction companies and the materials producers that supply them are still dogged by overcapacity, falling prices and weak demand from both consumers and the Government.

Never backward in coming forward with complaints about the Government's handling of the economy, the sector's trade bodies are some of industry's loudest bleaters. But with construction output now set for another year of decline, the Building Material Producers' latest swipe at the Treasury's Private Finance Initiative is justified.

Problems with the PFI are proving to be the final straw for an industry struggling to cope with tumbling private housing demand and weak commercial investment. Having been promised as a supplement to government infrastructure spending, private finance is now seen as at best a substitute for declining levels of public funding. That would not matter too much except that the value of the projects being pushed the way of the private sector is well below the cuts the Chancellor has imposed on public work. The four road schemes currently out to tender are worth pounds 380m over several years. Government spending this year on roads, however, has fallen to pounds 2.08bn compared with pounds 2.6bn two years ago and further reductions are slated.

The system is bogged down in a bureaucratic quagmire. Not only is the Government not providing orders directly but it has failed to put in place a workable system for creating work indirectly. But until companies have a blueprint for getting proposals accepted, at a reasonable cost to generate a reasonable return, their response will remain lukewarm and the industry will stay on its knees.

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