Construction Continues to Decline

8 February 2010

The UK 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 published today. Furthermore, with rising material costs and increasing fuel and energy prices, coupled with decreasing orders and enquiries, the environment for construction throughout 2010 is likely to deteriorate even further, delaying any recovery in the sector for at least another twelve months.

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 and 75 per cent of heavy side manufacturers anticipate that sales will not grow significantly during the next quarter.

Speaking about the survey, 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. 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.'

Commenting on the survey Stephen Ratcliffe, director UKCG, said:

"These survey results confirm that the industry continues to face tough trading conditions, which could get worse before they get better. The amount of public spending on construction following the election is going to be crucial in saving jobs in the industry. However, we have still got a lot of work to do to convince the politicians that spending on infrastructure investment is the best way to stimulate the economy despite the 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."

Julia Evans, chief executive of the National Federation of Builders added: "As with previous recessions, construction is still experiencing falls in output as the rest of the economy shows signs of growth. While we can only hope for the government to maintain capital spending at a level that will encourage sector growth, moves to make fair payment a contractual requirement to secure money already earned are very welcome."

Key survey findings are:

• 89 per cent of light side product manufacturers reported that they anticipated sales not to change significantly during the first quarter of 2010

• 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

• 75 per cent of light side manufacturers and 33 per cent of heavy side manufacturers reported that costs had risen, with the majority citing raw material and energy costs

• 63 per cent of building contractors reported declining profit margins during the final quarter of 2009 due to falling tender prices

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