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Is the sector about to catch the house builders’ cold?

Three surveys last week indicated that it is not just house builders who are feeling the squeeze, other sectors are starting to suffer

Hold on a minute. This isn’t in the script. We know what the credit crunch means - trouble for the house builders as their customers desert them faster than a falling share price.

But the rest of the industry is just supposed to be getting on with the job, buoyed by strong public sector spending on building and major infrastructure works.

The industry isn’t recession proof by any means, but with many of its major players reporting forward order books that extend into 2009 and beyond, it sometimes feels that way.

The last week has given the sector a hard slap to rouse it from this reverie. The wake-up calls dropped as a triple whammy as Monday’s RICS construction market survey (“Credit crunch takes toll on construction sector”) was followed 24 hours later by the Chartered Institute of Purchasing and Supply’s construction purchasing managers index (“Activity levels contracted at strongest rate in survey history”).

By Wednesday, when the Office of National Statistics revealed that annual orders for the year to May were down four per cent, it had become clear that the credit crunch was no longer just a house builders’ issue.

A patchy outlook

A spokesman for the Construction Confederation said that the numbers reflected the fact that elements of the industry were starting to feel the pinch.

He said: “It’s a bit of a curate’s egg at the moment - good in parts. Things are tightening up but not to the extent that they are in housing. The chill winds may be blowing, but they are not howling.”

He added that the organisation was currently awaiting the results of its latest members’ survey, but there was a suggestion that the industrial sector was experiencing a sharp decline along with housing repair.

But he said that on the flipside, commercial work was doing better than anticipated, Building Schools for the Future works were coming through and that infrastructure was now one of the more positive sectors.

This position is reflected by Construction Products Association chief executive Michael Ankers.

While a business barometer published by the association last week highlighted future concerns, Mr Ankers said that there were still bright spots for the industry where the public purse was involved.

But he also offered a note of caution about such spending. He said: “All of the positive areas for the industry are reliant on public spending.

“The concern we have is that while the Government has not changed its spending plans so far, there is a big question over whether it might slow down to keep track with the economy.”

The current Government may be spending significant sums on public sector building projects. Yet there is a growing awareness that the cost of such work is becoming more difficult to cover by the stretched resources of HM Treasury.

After the next election it is likely that the new Government, of whichever political hue, will have to take the axe to much of this work, taking away the public sector spend that is keeping the industry afloat.