UK spending cuts threaten ME construction recovery

Elizabeth Broomhall , May 26th, 2010

Planned spending cuts on large scale public projects in the UK announced earlier this week threaten to hinder the recovery of construction industry in the UAE.

Chancellor of the Exchequer George Osbourne announced £6.2 billion (Dh32.9 billion) of cuts for the current financial year, stating that it was important to cut the country's deficit urgently so that debt repayments did not "spiral out of control". Osbourne said the UK was spending as much on debt as it was on defense, transport or policing.

Those departments taking the brunt of the cuts include business (£836 million), communities and local government (£780 million), transport (£683 million), work and pensions, (£535 million), education (£670 million), the chancellors departments (£451 million) and the devolved administrations (£704 million)

The worry is that UAE construction firms with close ties to the UK could feel the effects of those cuts, which may increase competition for contracts in the UAE as international construction firms see a fall in profits.

As well as harming the long-awaited and anticipated economic recovery in the Middle East, industry experts forecast that it would prolong a recession which continues to present challenges for the global construction sector.

The Construction Products Association in the UK called for urgent clarification on exactly where these cuts would be made. The Association’s Chief Executive Michael Ankers said: “Although it is clear that government will need to address its public borrowing, it is critical that government provides clarity on where potential spending cuts may occur and ensures that spending cuts do not occur in those areas that are key to facilitating the economic recovery such as in transport infrastructure and energy supply.”

So far, the Chancellor revealed that £1.7 billion (AED8.93 billion) of savings alone would be made from delaying and stopping contracts.