Builders and outsourcing companies fear public sector cuts

In case they had any lingering doubts that Chancellor Gideon Osborne’s 25 per cent (or is it 40 per cent?) cuts in public spending will impact the private sector just as much as local councils, such as Croydon, then the Coalition Government’s millionaires’ row on the front bench should speak to their chums in The City.

This week has seen millions of pounds wiped off the stock market value of some of the country’s biggest companies, as investors fear that the cancellation of Government contracts – such as the Building Schools for the Future programme which has seen £350 million spending in Croydon axed – will affect their businesses.

Well, here’s some of the damage already done to the Conservatives’ friends in the private sector:

• RM Group, the schools IT company, has warned that seven contracts worth £200 million are at risk after the Government axed the Building Schools for the Future scheme.
• Balfour Beatty, the giant construction company, has told shareholders there are uncertainties in some parts of its markets, “particularly with regard to government funding of infrastructure investment”.
• Mouchel, who provide commercial and technical advice to public bodies, has had a lucrative deal with Bournemouth council deferred.
• Connaught, a company specialising in social housing, has seen its share price dive in the last week over concerns that councils will postpone capital expenditure plans.
• Capita, Serco and G4S, all firms whose businesses include outsourced local council contracts, have also seen their shares dip in the last week.

The very manner that some of the Government’s cuts have been announced suggest that it has more to do with political dogma than really trying to re-balance the economy.

Building Schools for the Future was a flagship Labour programme to build new schools and refurbish existing ones. On Monday, Education Secretary Michael Gove  scrapped plans for redeveloping buildings at 700 schools around the country, including £350 million-worth of investment in Croydon schools.

But such was Gove’s haste to wield the axe that the  announcement was botched, with more than 25 errors in his department’s documentation, causing confusion and anger among the affected schools, and Gove being forced to make an apology to parliament. Six of the best and a thousand lines for public school-educated Gove might be more appropriate.

What Gove and his axe-happy chums need to realise, and quickly, is that it is not a matter of spending the country’s way out of a recession. Britain, London and Croydon, need to build our way out of an economic depression.