I read in The Times that economist Erik Britton argues that most of the strong growth in construction which helped produce the unexpectedly good GDP figures for the second quarter is likely to have come from a rush of last minute public sector work before the election.
If that did happen, then it is a surprise that it should be in the first quarter of the financial year for public sector accounts. In the past – especially during the years of cash limit controls – it was the fourth quarter (January to March) which used to see the last minute rush, usually in easy-to-get-going projects, such as repairs & maintenance to council housing, in order to use up any spare money from the allocation for the year.
Well there have been reforms to public sector spending rules since then, some aimed specifically at smoothing out such distortions. But if the ‘rush to spend’ applied to new build contracts, then although the blip in construction growth for April-June will not be sustained to keep GDP growth going, it could spell trouble for the new government’s attempt to cut spending if the moneys needed to complete the projects has been contractually committed.
But it could help explain the unseemly rush to cancel new school projects & the confusion over which were too far advanced to be cancelled.
