Anthony Hudson - Time to incentivise the construction industry

News headlines paint a confusing picture of the construction industry's health.

On the one hand, architectural practices are again taking on employees having been one of the worst hit businesses in the recession. Investment in bricks and mortar in London is still booming and house builders, like Taylor Wimpey, are upbeat for this and next year's housing market.

Yet at the same time we hear that the industry contracted further over June and the prediction is for further contraction over the coming year.

What is happening? The world is awash with savings cash looking for havens of safe investment – currently partly focused on the UK and on London in particular.

Two years ago, 2010 saw record foreign inward investment and this continues with the benefits of the UK being outside the Euro, from Arab Spring instability, and Middle Eastern, Chinese, Indian and Russian wealth.

London is itself awash with buildings built and bought with overseas money: the amazing Shard, the Olympic ArcelorMittal Orbit or the exclusive Candy & Candy One Hyde Park apartments selling at �100m are a few examples.

Taylor Wimpey and other large house builders' bullish predictions rely on a skewed housing market of inflated prices because of a shortage of new homes in affluent parts of the UK.

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These lucrative but exclusive ventures bring few long-term social and economic benefits. However, since they are the major show they are skewing the construction economy providing profitable business only to a small section of the industry.

But this opportunistic window will eventually close, the bubble will burst and we will be left with an even bigger hole in the sector.

Like other businesses we need to rebalance construction towards long-term benefits. The only mechanism to do this is through government encouragement and incentives.

The evidence is there. In countries where the 'entrepreneurial state' has risked seed funding of various cutting edged industries these have subsequently blossomed and benefited the economy. Our construction industry needs incentivising towards green technology, encouraging a competitive and affordable house building sector and significant investment in public infrastructure. It would help break through the stalemate we currently have and reduce the huge risks that any would be construction entrepreneur faces at the moment as well.

In small ways it is happening here in Norfolk. The New Anglia Local Enterprise Partnership (LEP), in its Growing Places campaign, shows how state funding could kick-start projects that private developers consider too risky in the current economic climate and that will, in the long run, create wealth and social benefit for many.

But, unfortunately, these initiatives are drops in the ocean. Until this government restores some confidence in construction by putting significant resources and financing in place to help re-boot and reduce risk it will remain in the doldrums and reduced to chasing short-term unsustainable opportunities.