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Lower interest rate plea
00:00 04 Nov 1998
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The National Council of Building Material Producers (BMP) has made
a plea to the Bank of England for a cut in interest rates to end
the UK's 'squeeze' on construction.
At the autumn luncheon of the BMP, president Peter Johnson told guest speaker Mervyn King, deputy governor of the Bank of England, that: "The squeeze on the [construction] sector has gone on too long and developments elsewhere in the world look like being the last straw."
He said that while periods of tight monetary policy had given many industries "the occasional cold, construction has suffered recurrent pneumonia," which has resulted in capital expenditure all too often being delayed or abandoned, with training and R&D programmes also suffering.
Johnson said: "Even today, at what many fear may prove to be the high point in our cycle, we only spend £800 per head on construction, compared with an average of nearly £1,500 in other developed countries."
Johnson warned King that construction output still remained 4.5 per cent below the level reached in 1990, whereas the UK economy as a whole had grown 18 per cent over that same period.
He added that the construction industry shared the objectives of the Bank of England Monetary Policy Committee (MPC) in wanting sustainable growth not a boom: "We do not want a repeat of the late eighties binge and certainly not of the early nineties hangover.
"Those of us involved in the earlier stages of the building process are greatly worried about the risk of an imminent recession, and the damage that would do to our capability to recover and grow.
"We understand your concern that lowering interest rates too far too soon could cause inflation, but... we believe those fears are greatly outweighed by the risks to our industries and to the nation's longer term growth capacity by doing too little too late."
King's responded by saying that the overriding concern of the MPC was to hit an inflation target of 2.5 per cent and to consider the economy as a whole. The stance was received coldly by the 300 delegates.
At the autumn luncheon of the BMP, president Peter Johnson told guest speaker Mervyn King, deputy governor of the Bank of England, that: "The squeeze on the [construction] sector has gone on too long and developments elsewhere in the world look like being the last straw."
He said that while periods of tight monetary policy had given many industries "the occasional cold, construction has suffered recurrent pneumonia," which has resulted in capital expenditure all too often being delayed or abandoned, with training and R&D programmes also suffering.
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Johnson said: "Even today, at what many fear may prove to be the high point in our cycle, we only spend £800 per head on construction, compared with an average of nearly £1,500 in other developed countries."
Johnson warned King that construction output still remained 4.5 per cent below the level reached in 1990, whereas the UK economy as a whole had grown 18 per cent over that same period.
He added that the construction industry shared the objectives of the Bank of England Monetary Policy Committee (MPC) in wanting sustainable growth not a boom: "We do not want a repeat of the late eighties binge and certainly not of the early nineties hangover.
"Those of us involved in the earlier stages of the building process are greatly worried about the risk of an imminent recession, and the damage that would do to our capability to recover and grow.
"We understand your concern that lowering interest rates too far too soon could cause inflation, but... we believe those fears are greatly outweighed by the risks to our industries and to the nation's longer term growth capacity by doing too little too late."
King's responded by saying that the overriding concern of the MPC was to hit an inflation target of 2.5 per cent and to consider the economy as a whole. The stance was received coldly by the 300 delegates.
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