Contractors World


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Contractors World UK & Ireland
2012 Vol 2 No 2
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Construction News - Economics - Business - Regulations

Photo: Gerald England

Tough times ahead as public sector funding fallsTough times ahead as public sector funding falls

Variable Q4 Heralds Worsening 2012

The latest Construction Trade Survey shows that the final quarter of 2011 was very poor for the vast majority of the construction industry, especially SMEs, which continues to be constrained by a lack of finance and sharply falling public sector funding.

Commenting on the survey, Noble Francis, Economics Director at the Construction Products Association said: ‘Cuts to public sector capital budgets had a tangible impact on activity across the construction supply chain, exacerbated by economic uncertainty and a lack of lending. As a consequence 2011 Q4 was very challenging for the industry.

However, of even greater concern, previously positive workloads in sectors such as commercial and private housing have now become negative. Furthermore, prospects for the industry in 2012 are poor with sharply deteriorating order books and enquiries.

‘The only bright spots appear in exports and infrastructure. Yet this is unlikely to be sufficient to offset all the other sectors in which workloads are declining. As a consequence, instead of being a driver of growth in the UK, construction is likely to hinder economic recovery this year unless the Chancellor takes steps in next month’s Budget to stimulate the industry and the economy as a whole.’

Speaking about the survey Stephen Ratcliffe, Director UKCG, said: ‘Business conditions remain challenging but there are also still opportunities for the industry. UKCG is working with government to help ensure the pipeline of public sector projects announced at the time of the Autumn statement is translated into reality and that we help deliver the best possible value to a cash strapped public sector to ensure some continuity of work.’

Julia Evans, Chief Executive of the National Federation of Builders added: ‘With energy and material costs up, confidence down and lending conditions set to deteriorate further through 2012, it is hard to see how much of the industry will survive if these conditions are sustained. Marquee projects such as the Olympic Stadium will always give the impression of a vibrant industry but the vast majority of firms will only be able to survive for so long with cutthroat competition for work, unreasonable credit rates and late payment before they join the 2,700 construction firms that went into administration in 2011.’

Key survey findings include:

  • 37% of large and medium sized building contractors, on balance, reported that output in 2011 Q4 was lower than during the same quarter one year earlier.
  • The civil engineering workload balance was positive (at +5%) for the first time since 2008 Q1.
  • Manufacturers of light side products benefitted from growth in export sales with 37% of firms, on balance, reporting year-on-year sales growth in Q4.
  • Enquiries levels to SME contractors were widely reported to be below average, by -30% on balance.
  • Nearly half of specialist contractors surveyed reported a quarter-on-quarter reduction in orders in Q4.
  • Materials cost inflation and rising energy prices were the main drivers of strong overall cost inflation in the last three months of 2011.

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Page updated: February 2012

 

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