Contractors report energy and rail work uplift

Aaron Morby 11 years ago

A handful of large contractors operating in major rail and energy infrastructure bucked the trend of declining orders and output seen across the rest of the industry at the end of the year.

According to results from the latest Construction Trade Survey published today the vast bulk of the industry continued to endure difficult trading with orders down, rising supply-side costs and worsening late payment in the final quarter of 2012.

On the other hand, larger infrastructure firms, especially those working in the railways, airports and electricity sub-sectors, reported improving conditions which should pave a way for an expansion in work this year.

But the industry’s building contractors continued to face extremely harsh trading with 23%, on balance, indicating that output contracted.

Noble Francis, economics director at the Construction Products Association said: “It was good to see a rise in construction output for Q4 compared to Q3, when activity was adversely affected due to the Olympics and Paralympics.

“However, output remains 9.3% lower than a year ago and this is reflected in the Construction Trade Survey.”

He said: “A minority of firms working on energy and rail projects continue to thrive as do construction product manufacturers who are able to export outside the EU. Yet, overall, the industry continues to suffer falls in work across both public and private sectors.

“Furthermore, outside of infrastructure, the industry is expecting that 2013 will be even more difficult, with declining orders and enquiries across the industry.”

Stephen Ratcliffe, director UKCG, said: “Business conditions remain challenging and because construction is a lagging indicator there is unlikely to be any major improvement this year.  Nevertheless, there remain good opportunities in infrastructure, in the schools programme and energy sector.

“Government support in providing guarantees to kickstart stalled projects is welcome, as has been the announcement of PF2.”

The Civil Engineering Contractors Association workload report showed a zero balance for 2012 Q4, ending two quarters of declining workloads.

But civils contractors’ order books had a negative balance for the second consecutive quarter, with 5% more firms reporting declining orders than increasing orders.

CECA director of external affairs Alasdair Reisner said: “This survey shows a welcome improvement in output, and despite tough trading conditions, a record response rate from CECA members.

“Positive signs in members’ workloads show the industry is moving in the right direction.

“CECA members are facing challenging trading conditions. The squeeze on contractors’ margins continues, as costs continue to increase while tender prices fall.

“It is thus vital that the government acts to release work in both the public and private sector, if the infrastructure sector is to act as an engine for growth in the economy.”

Trade survey Key findings

  • Private industrial and non-housing R&M were the worst hit sectors for building contractors, with 34% and 30% respectively, reporting falls in output
  • 23% of building contractors reported that, on balance, output fell in the private commercial sector, whilst in private new housing output flatlined
  • 13% of heavy side product manufacturers reported that, on balance, sales fell in Q4, whilst 46% of light side manufacturers stated that sales increased
  • 62% of contractors reported that, on balance, orders fell in the fourth quarter
  • Civil engineering workloads were flat during Q4, an improvement from a negative balance of -17% in Q3
  • 43% of large and medium sized building contractors, on balance, suggested that tender prices reduced in 2012 Q4
  • 30% of building contractors, on balance, reported rises in costs, marginally lower than the 32% in Q3
  • 46% of contractors, on balance, reported falls in profit margins, down from 49% in Q3

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