CONSTRUCTION CONTRACTION CAUSES CONTINUING CONSTERNATION

The latest Construction Trade Survey has been published today hot on the heels of last month’s GDP figures, published by the ONS, showing a deepening recession led by sharp falls in construction activity.

The survey provides the depressing detail to the headline figures produced by the ONS. All parts of the industry have seen a sharp fall including current workloads, new orders and tender prices. It illustrates the continuing woes and growing uncertainty for the UK economy as a whole.

As public sector investment continued to decline, in line with the government’s counterproductive austerity programme, there was no sign of any private sector recovery to offset these cuts, leaving the sector with very little optimism for recovery in the near future.

Key survey findings include:

• Large and medium sized building contractors reporting output in the second quarter of 2012 lower than during the first quarter of 2011, which in turn was lower than Q4 and output has fallen in four of the last five quarters.

• Building contractors continuing to report that order books are falling. The overall orders balance stood at –25% in the first quarter and deteriorated to –50% in Q2.

• In 2012 Q2 30% of building contractors, on balance, reported rises in costs.

• In 2012 Q1, nearly a third of firms, on balance, reported that profit margins reduced yet this had increased to almost half of all firms, 49% on balance, by 2012 Q2.

• 45% of heavy side firms reported that sales fell between Q1 and Q2. However, 20% of light side firms, on balance, reported that sales rose between the first and second quarters of 2012.

• 6% of heavy side manufacturers, on balance, reduced headcount in the year to Q2. 8% of light side firms, on balance, increased employment over the same period. However, employment remained static for the vast majority of firms.

• 45% of heavy side manufacturers and 73% of light side manufacturers invested in product improvement.

Representatives of the construction industry were understandably gloomy. Noble Francis, Economics Director at the Construction Products Association said: “The position for construction in the UK is now looking very bleak indeed, as this is the fourth such fall in the past five quarters.”

Stephen Ratcliffe, Director of the UK Construction Group, spoke about the need for investment now, not in several year’s time. He said: "Declining public sector spend and a lack of confidence amongst private investors, means action is urgently needed to kick-start the construction economy. Recent announcements on infrastructure guarantees and rail investment have been welcome, but we also need ‘shovels in the ground’ today. More resources could be directed to social housing and repair and maintenance projects – these are labour intensive and can be got off the ground very quickly.”

And Julia Evans, Chief Executive of the National Federation of Builders added: “The country is basking in the feel good factor of the Olympics which aims to inspire a generation. However, with higher costs, rising numbers of insolvencies, falling output, lower demand and rapidly depleting skills the construction industry is in danger of losing an entire generation of talent. “

The industry is united in its calls for Government action and the nation is crying out for a change in direction. But Messrs Cameron, Osborne and Clegg et al seem fixated on their austerity programme. The obvious damage this is doing to the economy and the hardship it is causing millions of British people is unforgiveable.