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Construction declining while wider economy recovers

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 Products Association trade survey.

With rising material costs and increasing fuel and energy prices, coupled with decreasing orders and enquiries, 2010 is likely to deteriorate even further, delaying any recovery in construction for at least another twelve months.

Some 78 per cent of heavy side manufacturers endured a ninth consecutive quarter of falling output while 75 per cent of heavy side manufacturers anticipate that sales will not grow significantly during the next quarter.

Association economics director Noble Francis 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.”

The survey’s key 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.