If the building industry is collapsing GDP will follow – and it’s Osborne’s choice

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As the FT notes:

The value of work awarded to UK construction companies crashed during the past year, raising concerns that the impact of government spending cuts will be far worse than previously feared.

Several things come immediately to mind. First of all I note that the building industry claimed that the fall in construction activity that had such an impact upon GDP figures in the last quarter was overstated. Clearly that was not true: the fall is real.

Second, as is now very apparent, decision by the Conservative government to basically withdraw funding for investment by the state is having an immediate impact upon well-being. We will pay an enormous long-term  price for this. Thatcher's legacy was a massive underinvestment in the necessary resources required to deliver state services. Cameron is clearly doing the same. And yet we cannot do without schools, roads, hospitals, transport infrastructure, and soon. We are also abandoning large part of coastline, and increasing flood risk. All this will be the Cameron legacy. And in the meantime, people lose their jobs and demand declines in the economy, and recession looms on the horizon.

Third, expect stagnation at best, and recession more likely, when the next round of GDP figures come out.