Further evidence confirms construction growth, but poor prospects ahead

16 May 2011

The latest Construction Trade Survey published today, which brings together information from contractors, product manufacturers, specialists and civil engineers, provides further evidence that construction grew in the first quarter of 2011 compared to the weather-affected final quarter of last year. However, expectations for the year ahead are largely negative as the public sector retrenches and private sector sentiment remains weak.

Commenting on the survey, Noble Francis, Economics Director at the Construction Products Association said: 'This survey highlights that construction improved during the first quarter of the year, contrasting sharply with the ONS's construction output figures that indicated construction fell 4% over the same period. However, this improving situation is compared to the final quarter of last year, which was badly affected by poor weather in November and December. The industry's near term future is likely to be extremely challenging with domestic demand remaining subdued, exacerbated by expectations of further rises in fuel, energy and materials costs.

Speaking about the survey Stephen Ratcliffe, Director UKCG, said: 'The survey highlights that the situation for contractors improved in Q1 compared to the weather affected final quarter of 2010. However, there remains a great deal of concern regarding the year ahead given that we have not yet seen the full impact of the public sector cuts. The government has stated that construction is at the heart of its growth strategy for the UK economy and, as it accounts for around 10% of the UK's economy, it is vital that investment in essential schools, hospitals and housing is maintained at levels that will provide the basis for economic recovery.'

Julia Evans, Chief Executive of the National Federation of Builders added: 'Once again, the industry is working through a difficult set of challenges with rising costs, falling margins and lower demand. However, an obsessive focus on quarterly figures risks losing sight of the bigger picture. The overall downward trend is not encouraging. As long as the fundamental issues of difficulty with access to finance and prioritising cost over value remain, the trend is unlikely to be reversed.'

Key survey finds are:

? 56% of heavy side firms stated that heavy side sales volumes rose
? 43% of contractors reported that, on balance, activity rose during the first quarter of 2011 compared with 2010 Q1
? 77% of heavy side firms and 88% of light side firms stated that costs had risen over the past year
? 71% of contractors reported that, on balance, materials costs rose in the first quarter of 2011 compared to the final quarter of 2010

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