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Order books thin out as work dries up

The fall in construction workloads is starting to slow down – but order books are getting emptier – a survey has found.

The Construction Products Association’s Q2 State of Trade survey found the balance of building contractors reporting falling workloads was down to 14 per cent. This compares with 43 per cent in Q1.

Looking ahead, however, there is cause for concern, with 75 per cent of firms reporting a reduction in order books, up from 65 per cent in Q1.

Allan Wilen, economics director at business intelligence unit Glenigan, said: “The latest survey results indicate that the decline in contractors’ workload is at least slowing.

“Unfortunately, an accompanying slump in work in hand indicates firms’ order books are increasingly thin, threatening a further decline in output over the coming months.”

He added: “While recent Glenigan data supports the reported pick up in public sector enquiries, this is overshadowed by the decline in potential private sector projects.”

All sectors, with the exception of housing repair and maintenance, saw a reduction in falling workloads between April and June.

The biggest change came in the public non-housing sector where a balance of 14 per cent reported a drop in workloads in Q2, compared with 57 per cent in Q1.

This suggested that the Government attempts to spend its way out of the recession were helping but not by nearly enough.

Chancellor Alistair Darling year pledged to bring forward £3 billion from 2010/11 to stimulate work in construction, while this April’s Budget promised further funding for education, housing and energy construction.

While these sectors appear to be holding up better than privately funded areas, they are still reporting falling workloads at a desperate time for the industry.

And further trouble may be just around the corner as order book figures are declining.

The most dramatic falls came in the private commercial and industrial sectors, with balances of 87 per cent and 81 per cent respectively reporting reductions.

Firms have seen a pick up in enquiries in Government-funded sectors, giving hope that extra work may begin starting to trickle through.

Public housing enquiries were up, with a balance of 5 per cent reporting an increase from Q1. Public non-housing work was up according to a balance of 7 per cent.

But enquiries in the private sector housing and industrial sector fell according to a balance of 27 per cent, while commercial was down according to a net 6 per cent.

CPA economics director Noble Francis said: “The sharp fall in output within private sector construction has been exacerbated by falls in output from the public sector.

“This is extremely worrying given the large number of Government announcements [about] fiscal stimuli there has been recently.”

He added: “Unfortunately, any benefit from these proposals has yet to find its way to significant additional work for the industry. It is critical the Government ensures these recent announcements are translated into construction activity on the ground as soon as possible.”

Meanwhile, 26 per cent of building contractors reported that new housing output fell over the past year. And 66 per cent of building firms reported that tender prices fell in the second quarter of this year.

UK Contractors Group director Stephen Ratcliffe said:“Especially concerning is the fall in public sector construction, which provides clear evidence that the Government stimuli announced in the Budget and Pre-Budget Reports have so far failed to have an impact on the market.”

He added: “While companies are reporting increased enquiries, this may not lead to increased business. We have seen a significant increase in tender lists in the public sector over recent months.”

National Federation of Builders chief executive Julia Evans added: “Not only is it becoming increasingly difficult to win work, but profit margins are being squeezed for those companies that do manage to land contracts.”

Construction is experiencing far worse deflation than the economy as a whole due to the deep recession hitting the industry.