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Will government cutbacks curtail recovery in the construction sector?

Over the last three months we have seen a steady increase in activity in the UK construction sector which would appear to be back in a growth phase. However, as the UK government begins to make progress on tackling the UK budget deficit can we really expect construction in the UK to improve in the short to medium term against a backdrop of reduced government investment?

There is no doubt that government spending has assisted the construction sector in the past with schools, hospitals and new homes amongst a number of developments undertaken by the previous Labour government. However, under the Conservative/Liberal Democrat coalition we will see a massive reduction in public-sector investment which is almost certain to have an impact upon the UK construction sector in the short-term. That is not to say that all public-sector programs will be cancelled, but there will be a reduction until the UK economy is back on its feet and the budget deficit is under control.

As a consequence, it will take an increase in non-government financed developments to continue this impressive recovery in the UK construction industry. Whether this will be forthcoming in the short term remains to be seen as there are still concerns about the strength of the UK economic upturn and problems in the European Union.

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