Weak 2010 forecast for construction industry

Britain’s construction industry continued to decline during the final quarter of 2009 despite the wider economy returning to growth, according to the latest Construction Trade Survey.

The survey also suggested a bleak environment for 2010 with the industry facing rising material costs and increasing fuel and energy prices, coupled with decreasing orders and enquiries.

Trade body, the Construction Products Association, warned that this meant the recovery could be a year away.

The CPA said that with heavy side manufacturing sales providing an early indicator of how construction will perform near term, it is even more worrying that 78 per cent of heavy side manufacturers endured a ninth consecutive quarter of falling output. Some 75 per cent of heavy side manufacturers anticipate that sales will not grow significantly during the next quarter.

Noble Francis, Economics Director at the Construction Products Association said: ‘The continuing decline in workloads across the construction industry is of great concern, especially given that the situation has been exacerbated by rising energy and raw materials costs.”

He added: “This, combined with falling tender prices, is placing increasing pressure upon an industry that has now been in decline for two years. The Chancellor’s confirmation in December 2009 that public spending on construction will fall by more than 50 per cent during the next four years only provides more concern for the industry following last year’s sharpest fall in construction on record and risks delaying any potential recovery in 2011.”

Stephen Ratcliffe, chief executive of the UK Contractors Group, said the industry needed to work on convincing politicians that spending on infrastructure investment is the best way to stimulate the economy despite a recent LEK Consulting report which highlighted that for every £1 spent on construction, the economy benefits by £2.84. “Getting this message across and acted upon remains UKCG’s top priority. We urge everybody in the industry to join us in this,” he said.

The survey found that 89 per cent of light side product manufacturers reported that they anticipated sales would not change significantly during the first quarter of 2010

Some 91 per cent of building contractors reported that order books during the fourth quarter of 2009 fell in the industrial sector which is a record low for the Construction Trade Survey

A total of 75 per cent of light side manufacturers and 33 per cent of heavy side manufacturers said that costs had risen, with the majority citing raw material and energy costs. At the same time 63 per cent of building contractors reported declining profit margins during the final quarter of 2009 due to falling tender prices.