Industry crys out for second stimulus in Budget

Aaron Morby 12 years ago

Contractors have warned the outlook for 2012 is looking worse than expected after a sudden fall off in private housing and commercial work.

The latest Construction Trade Survey, covering the spread of major, specialist and small building contractors as well as material suppliers, shows that the final quarter of 2011 was very poor for the vast majority of the industry.

Small and medium sized contractors are being hardest hit as lack of finance and sharply falling public sector funding takes it toll.

Civil engineering is the only part of the industry facing the future with any confidence as regulated industries like water and rail keep orders flowing.

The worsening climate has prompted calls for a second Budget stimulus to help the building sector.

Big and small builders are being hit by stalling office work, low house building activity and public spending cuts hitting Government building projects.

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.”

    Key survey findings

  • 37% of large and medium sized building contractors, on balance, reported Q4 output lower than previous year
  • Civil engineering workload balance rises for the first time since first part of 2008.
  • Manufacturers of light side products see growth in export sales
  • Enquiries levels to SME contractors plummet
  • Nearly half of specialist contractors surveyed reported orders falling in last quarter
  • Materials cost inflation and rising energy prices drove strong overall cost inflation

Stephen Ratcliffe, director of the UK Contractor Group, 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.”

But the prospects for smaller firms in the building sector have taken a serious turn for the worse.

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.”

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