A new paper has set out the key challenges facing London's construction industry, as it reveals the value of new construction orders in the capital has fallen by almost a quarter in just two years.

The summary paper, compiled by the London Assembly Economy Committee after a meeting with industry experts in May, says low confidence and falling public investment are limiting output and employment growth in the capital's construction sector, and small and medium-sized firms have been the hardest hit.

While London has a number of long-term major construction projects underway, at least six commercial building projects in the City – such as The Pinnacle on Bishopsgate – have recently been stalled or cancelled. Nationally, the construction industry has contracted by 7% in the past year and by 19% over five years.

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The paper also highlights:

• Approximately 150,000 skilled construction workers in the UK are currently unemployed, costing the state at least £2.1bn per year in benefit costs and lost revenue.

• Planning permission exists in London for 210,000 new homes, but many schemes are stalled for a variety of reasons, including the large number of sites owned by 'non-builders' and smaller firms experiencing difficulties obtaining funding.

• Around 260,000 Londoners are employed in construction. The paper says the industry is suffering from significant skills shortages, particularly glaziers, plasterers, dry-liners and building envelope specialists, yet there is inadequate training provision in London for these areas.

The paper sets out a number of areas where experts say the Mayor, construction firms and other partners could take action to boost the sector and increase opportunities for Londoners, including removing barriers to encourage large-scale building of new homes, pushing forward on retrofitting existing housing, and increasing the number and quality of apprenticeships available to the sector. It says this will not only boost the industry, but create a large number of new jobs in the construction sector as well.

(CD/JP)