Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

After solid 2004, drop in refurb jobs leaves doubt


While remaining strong, private house building is unlikely to match 2004 but social housing jobs look promising.The lack of refurbishment work is a problem though, writes Brian Green

WITH THE rate of growth at 4 per cent,2004 proved yet another solid year for construction.But 2004 was really the year of the private house builder.

The call of record profits continues to sound with every announcement by the majors.The total pre-tax profits of the top 10 house builders for 2004 is likely to stand close to a staggering £3 billion.

As the recently released official output figures show, over the past three years, while the commercial sector has made spluttering progress, the private house building sector has thrust forward in leaps.

It is now almost double, in cash terms, what it was in 2001.

By this measure private house building has retaken its historic position as the biggest single construction sector.

It has nudged aside private commercial work, which has dominated construction's fortunes for most of the past 15 years.

Added to the boom in private sector housing work was a sharp increase in work in social sector housing (albeit from a low base) and a high level of housing refurbishment work.

So it is little wonder that the supply base for the housing market is excited at present.

In total, social and private sector, new build and refurbishment housing related work increased in real terms by 8 per cent last year.

This rise accounted for more than 80 per cent of the industry's total growth in 2004.

The current level of growth in housing related work is far from likely for all of 2005, but there is every sign in the figures that the year ahead should continue to see housing as one of the more vibrant sectors.

The Government's new orders data shows that in the 12 months to January private house building orders were up 16 per cent on the previous 12 months, while social housing sector orders were up 14 per cent.

There is no direct correlation between increases in orders and increased output down the line but this strength in the orders figures does provide a heavy hint that output in the sector should continue to rise.

Emap Glenigan figures also point to a very health few months for housing work.

The Glenigan database does not track smaller contract awards that make up a large part of housing related work but the value of contract awards recorded by Glenigan in the 12 months to February has risen by 50 per cent.

Whatever the fears over house prices it does seem as if the production of new homes is set to continue in strong form.

This is in stark contrast to the new infrastructure work sector, which has spluttered and stumbled over the past two years.

Output fell 9 per cent in 2003 and a further 13 per cent in 2004.

The latest new orders figures suggest more of the same may be in store.

Infrastructure orders in the 12 months to January are down 23 per cent on the previous 12 months.

This is despite a slight perking up over the past three months.

The majority of this slide has been down to reduced publicly funded work.

The subsectors to suffer most from falls in output were road, rail and the water industry.

Electricity proved to be the only area in this sector to show any growth over the past two years.

The latest RICS economic briefing highlighted sluggishness of public funded work, which it says has failed to hit targets.

RICS calculates that in 2004 gross public sector investment in construction fell by 10 per cent.

This has been felt in other areas such as public sector non-housing repair and maintenance, which fell back in 2004.

That said work on hospitals and schools continues to churn on at high and growing levels.

Taking both public and private funded work, these two subsectors are among the brightest stars at present.

Last year also brought a resurgence to work for the leisure sector.

The Arsenal and Wembley stadia projects played a significant role in boosting the figures.But this could prove short-lived.

The contract awards figures for leisure produced by Glenigan suggest the surge has past and workloads may start to ease from the peak hit in the summer of 2004.

One question mark that does hang over the figures for construction overall is whether the slide in repair, maintenance and improvement work over 2004 is a trend or whether it is just a short-term drop.

While new work grew by 7 per cent last year, RM&I fell back slightly.

As this sector represents in rough terms half of construction output, its performance has a big bearing on the overall prospects for the industry, especially prospects for smaller builders.

If the slide in refurbishment work in 2004 does prove to be a sign of firms cutting back on spending on construction, this does not bode well.

The new work sectors are unlikely to see the same level of growth in the coming year as they did in 2004.