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Private sector drop in spending hits construction sector

The latest industry Construction Trade Survey has highlighted falling private sector activity as a cause for concern, despite the government’s hopes it would supplement dwindling public sector workloads.

The latest survey was compiled by six leading industry organisations and showed that construction activity fell sharply in Q3 2012, despite a return to growth for the UK economy as a whole. 

More than 400,000 jobs have been lost on the contractors side of construction, the report added.

With construction expected to decline until 2014, more job losses are likely over the next two years.

Construction Products Association economics director Noble Francis said that public sector declines were now being followed by sharp private sector falls.

He added: “On top of this bad news, infrastructure work declined in Q3, which is extremely concerning given the number of recent announcements from the government aimed at stimulating infrastructure activity.”

Construction Trade Survey:

The survey brings together the results surveying members of the Civil Engineering Contractors Association, Construction Products Association, Federation of Master Builders, National Federation of Builders, National Specialist Contractors Council and the UK Contractors Group.

The net balance of contractors reporting falls in profit margins remained unchanged at 49 per cent, while 79 per cent of heavy-side manufacturers and 94 per cent of light-side manufacturers expected sales to stay unchanged or only rise or fall slightly over the next year.

Output fell by 29 per cent in private industrial activity and by 27 per cent in the private commercial sectors.

In infrastructure, Wales was the hardest hit, with 77 per cent of firms saying that orders fell in Q3, while 69 per cent reported a decline in orders compared with 2011.

In England, a third of firms reported falling order books compared with none in Q2.

UK Contractors Group director Stephen Ratcliffe said: “These figures show how difficult trading conditions continue to be.

“With declining public sector spend and a lack of confidence among private investors, action is urgently needed to kick-start the construction sector.

“The industry welcomes the steps ministers have taken to boost confidence in construction, but the focus must now be on delivery.

“Programmes such as the UK Guarantees Scheme are a positive step, but we need to see shovels in the ground as soon as possible.”

National Federation of Builders chief executive Julia Evans added: “These figures are a stark reminder that, while the rest of the economy is showing tentative signs of growth, the government should not take its eye off the ball with regards to construction.

“The government’s moves to streamline and speed up planning, fast-track and fund infrastructure and fund more housebuilding will not yield immediate results, but they are the building blocks necessary to ensure a sustainable recovery for construction.

“The more immediate consideration for government is to continue to ensure that access to finance for small- and medium-sized businesses remains a high priority.”

Key survey findings include:

  • Public new housing and public non-housing were the worst hit sectors for building contractors, with output falls of 38 per cent and 34 per cent respectively
  • Output fell by 29 per cent among private industrial building contractors and by 27 per cent in private commercial sectors
  • 20 per cent of heavy side product manufacturers and 41 per cent of light side manufacturers reported that sales fell in Q3
  • 26 per cent of contractors reported that orders fell in the third quarter
  • 17 per cent of civil engineers reported a fall in workload during Q3
  • 50 per cent of large and medium sized building contractors said tender prices reduced in 2012 Q3
  • 32 per cent of building contractors reported rises in costs, marginally higher than the 30 per cent in Q2
  • The proportion of contractors reporting falls in profit margins remained unchanged at 49 per cent

 

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