Subcontractor expectations have turned negative for the first time in more than a year as the long-feared public spending cuts become a reality.
A survey by the National Specialist Contractors Council found more of its members were expecting a drop in workloads over the next three months than were anticipating a rise.
The survey polled members of 32 specialist trade bodies that make up the NSCC.
Just 25 per cent of respondents anticipated a rise in workload during the final quarter of the year, while 33 per cent foresaw a fall, leaving a balance of -8 per cent.
This was a big swing from a positive balance of 18 per cent that expected a rise in workload when surveyed during the second quarter of the year. The last time there was a negative balance was in the second quarter of 2009.
The NSCC report said the data “clearly demonstrates that there is a large degree of uncertainty about the impending budget cuts and where any future work will come from”.
Although the survey was conducted in the months before the Comprehensive Spending Review, subcontractors were clearly factoring budget cuts into their thinking. Chancellor George Osborne announced on 20 October that total government capital spending would be slashed from £68.7 billion in 2009/10 to £47.2bn in 2014/15.
PwC strategy partner Chris Temple last week told Construction News the industry had too much capacity. He said: “Companies need to either scale down or merge to take out this extra capacity, and large publicly listed firms are most likely to lead the consolidation.”
Many departments had slashed spending well in advance of the announcement, with hundreds of schools projects scrapped and scores of transport schemes placed on hold over the summer.
This showed in the NSCC report, with the number of firms reporting increased enquiries down to 36 per cent in Q3 2010, from 42 per cent in the previous quarter.
With 36 per cent reporting a decrease in enquiries, the balance was neutral, ending two successive quarters of growth in enquiries during 2010.
Firm orders were down to a balance of -9 per cent, from -4 per cent in the previous quarter.
NSCC chief executive Suzannah Nichol said: “It is going to be a tough year for the industry, and specialist contractors will be looking at their activities to identify where the work is going to be available. We need to bear in mind that the cuts are coming in gradually over the next four years, so while it is going to be tough there is still going to be work around.
“This quarter’s results highlight the detrimental effect of uncertainty on the specialist sector and restoring confidence will be vital to the long-term recovery of the industry.”
Of those surveyed, 21 per cent expected a fall in employment levels, up from 11 per cent last quarter. The negative balance of respondents reporting tender price rises remained high at -58 per cent. But the trend for increasing supplier prices continued with 67 per cent noting climbing costs, compared with 64 per cent last quarter and 33 per cent this time last year.
Some 59 per cent of respondents anticipated reduced margins, while just 7 per cent of respondents anticipated increased margins.