Looking across the remaining cranes on the sunny Manchester skyline, CIPFA members at their conference could be forgiven for believing the city is still booming despite the recession. In fact, the construction that continues today is a baleful indicator of a boom that once was. In reality, the private capital that created the ‘new Manchester’ has dried up.
This year and next, public sector cash from bodies such as the Homes & Communities Agency will fill part of the gap left by the developers. But then what? Chancellor Alistair Darling has already said there will be sharp reductions in public sector capital investment between 2011-12 and 2013-14. Some of this slow-down starts in 2010-11 because capital spending has been brought forward to 2009.
Unless the private sector construction industry picks up very quickly in 2010, there is now a risk there will be a serious slump in house-building, regeneration and transport developments for several years after 2010. This would occur whatever the outcome of the coming general election.
In and outside of the formal sessions at the conference, public sector finance managers will need to consider how best they can help minimise the risk of such a recessionary slump. Does local government hold reserves and investments that could, in part, be used to kickstart privately-led developments? Can PFI be resuscitated and made more acceptable? Can assets be sold and the resources recycled into new investments? Action will certainly be needed.
