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Construction Leaders Forum: Order books and confidence shrink

Construction Leaders Forum on extent of downturn and anger at government

What is the forum?

The Construction Leaders Forum was set up last month by CN as a way of bringing together the most senior managers from the country’s biggest construction companies in a completely off the record discussion of the state of the market. We will be holding the forum every six months and reporting widely on the results.

As well as coverage in Construction News we will be producing a full report, in partnership with Hays Construction, of the findings for circulation to people who influence the future of the industry from outside - key clients trade bodies, lobbyists, politicians and others. If you would like to request a copy of the report, email nick.edwards@emap.com.

The order books of construction’s largest companies are shrinking fast as the industry contracts, while confidence and clarity about the future are continuing to fall - according to unique research done by Construction News.

The Construction Leaders Forum brought together 33 chief executives, managing directors and chairmen from companies with a combined UK turnover of more than £20 billion, for off-the-record discussions of how the market is really affecting the industry.

It found that two-thirds had seen their order books shrink by more than 10 per cent in the past year - with only one in five seeing any kind of growth. Threequarters of attendees expected the industry to shrink by more than 10 per cent this year.

One main contractor chief executive said: “There is a certain amount of insulation by work in progress but once it’s done there is none left to replace it.”

The broad consensus from the CLF was that the market has not come close to bottoming out yet and that real recovery would not begin until 2011.

There was strong criticism of Gordon Brown’s government, with forum attendee after attendee lamenting the lack of strategic vision or structure for real economic stimulus. There was a clear belief that ministers and civil servants lacked not just the will but the skill to act effectively.

Confidence in the Government’s spending stimulus has fallen markedly since the autumn, although there was praise for the efforts being made by the new Homes and Communities Agency.

One chief executive said: “I am more negative than I was six months ago - this is a government that rules by announcement rather than by achievement, and which has foundered on very dodgy data.”

There was strong belief that public sector work is already contracting more strongly than officially admitted with a likely election a year away.

Discussion by forum members suggests that major delays and cancellations in projects - both public and private - are even more common than thought. Half of attendees had had more than five contracts cancelled and postponed in the past three months - only two out of the 33 attendees had had none.

Broken down by sector, only utilities showed a small positive balance between shrinkage and growth with 35 per cent predict contraction. Asked which sector they didn’t currently work in that they considered getting into, one in five said utilities, the highest result.

Strong contraction in housing and offices was predictable but the lack of confidence in public sector work was more surprising. In both education and healthcare, only about a quarter of leaders expected to see growth this year.

Despite this four out of five forum attendees said their reliance on public sector work would grow over the next two
Asked which sector would be the strongest in 2009, 39 per cent cited infrastructure, followed by education, healthcare and social housing. In terms of the best region this year, London and the South-east dominated with 42 per cent and 39 per cent of the vote respectively. As for the worst, the South-west was named by 21 per cent of leaders and Northern Ireland named by 14 per cent.