Construction Council calls for action on credit insurance

Construction leaders today called on Government to act urgently to counter the sudden withdrawl of credit issurance.

The influential CBI Construction Council also warned more action is needed to boost lending and called on Government to swiftly appoint a construction Tsar to champion the industry in Whitehall.

This week CJ exclusively revealed credit insurers have slashed the amount of cover they offer construction by £10 bn in the last 12 months. A year ago around £25bn of construction work was credit insured but that figure has collapsed by 40 per cent.

CBI Construction Council chairman John McDonough has warned that a shortage of credit and credit insurance cover, especially for small and medium size companies, is leading to many construction projects being delayed or moth-balled, and hampering any prospects of a tentative recovery in the housing market.

He warned: "A big issue affecting construction firms is trade credit insurance. Firms need to be confident their cover isn't going to get pulled unexpectedly half-way through a contract."

"The construction industry employs more than two million people and accounts for nearly a tenth of our GDP. Without urgent action to support this sector, we will be inflicting long-term damage to the economy."

McDonough said that recent measures to support small and medium sized businesses would hopefully help some firms along the supply chain. But he also warned that access to credit had tightened considerably over the last few months and the Government needed to get lending working across the whole of the economy.

"Unless the government takes bold steps to kick-start lending across the board, we will see more construction firms going under and more skilled jobs lost," he warned.

McDonough added: "The Government has budgeted to spend over £40bn on construction projects in 2009 and has pledged to bring forward some £3bn of planned future spending into 2009.

"If the Government gets on with spending this money, it would give the industry a boost at a critical time, but this isn't happening on the ground.

He added: "A strong and influential chief construction officer is needed to cut through the bureaucracy and help get these projects up and running quickly. There is no time to lose."