Construction recession deepens

Output in the UK construction industry continued to decline in the third quarter of 2009m, the Construction Products Association said today.

Construction recession deepens

The CPA’s latest Trade Survey found that, with the economy still in decline, the prospects in most areas of construction appear bleak. The results point to the fact that the construction industry facing its sharpest fall on record this year with a further decline in output expected in 2010.

Key survey findings are:

86% of heavy side manufacturers and 75% of light side manufacturers reported that sales, on balance, fell significantly in the third quarter of 2009

60% of building contractors reported that output fell in the industrial sector and 50% reported that output fell in the commercial sector during the last three months

63% of building contractors reported that their order books fell in the industrial sector and 76% reported that their order books have fallen in the commercial sector

62% of heavy side and 75% of light side manufacturers stated that unit costs had risen due to rises in raw materials prices and fuel/energy costs despite falls in labour costs

75% of building contractors reported that tender prices and profit margins fell over the last quarter and 74% of civils contractors reported that, on balance, tender prices fell during the same period.

Speaking about the survey, Noble Francis, CPA economics director said: “Although it was a surprise to many forecasters that the economy continued to contract during the third quarter of 2009, the fall in construction activity which was predicted in earlier forecasts, is now bourne out in the latest Construction Trade Survey, which illustrates that all areas of construction have contracted during the last quarter.

“With sharp falls currently in private sector construction and the potential for sharp spending cuts post-election in public sector construction, this is a critical time for the industry, which is not expected to see any growth until 2011 at the earliest.

“The challening economic environment and difficult conditions for private sector construction mean that it is vital that government does its utmost to ensure spending is maintained on the housing, schools, hospitals and transport infrastructure for which the long-term demands will not disappear, despite the recession.”

Julia Evans, Chief Executive of the National Federation of Builders added: “The survey results give a glimmer of hope in falling costs for contractors and a light at the end of the tunnel with predictions of better conditions in 2011. However, the underlying message is still one of intense pressure from falling tender prices, falling demand and increasing unemployment. It is imperative that capital spending is maintained, rather than reduced, to stem the loss of skills and to ensure that there is still a viable industry when the economy recovers.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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