Public sector cuts hurt construction

Cuts to public spending are now affecting construction activity, according to the latest survey from the Construction Trade Survey published today. (August 8).

61% of heavy side manufacturers reported an increase in sales in the second quarter of 2011, compared with 2010 , and as only 14% saw sales fall, the heavy side balance strengthened to 47%. Lightside firms were equally positive, with 59% reporting an increase over the year and 22% a decrease, giving a balance of 37%. On balance, 42% of heavy side firms and 44% of light side firms expect sales to rise over the next year.

However, with the exception of private commercial, balances were unanimously negative in terms of sector output. A balance of -50% for public non-housing output showed the reduction in publicly-funded non-housing work and with 42% of respondents recording a fall in housing R&M work, pressure on household finances is taking its toll on the decision to invest in non-essential R&M work.

Having been in positive territory for six months, the private new housing balance fell to – 4%, while the public new housing balance stood at -6%.

Small to medium-sized builders reported that construction workloads declined for the 14th consecutive quarter, however, the proportion of firms reporting higher overall workloads increased from 19% in quarter one to 24% in quarter two. .

Private housing recorded the largest change, with 21% of firms reporting stronger workload compared with the same quarter one year earlier, an increase compared with just 12% in 2011 Q1.

Noble Francis, economics director at the CPA said: “At a time when tender prices and profitability remain under extreme pressure, persistently high materials price inflation is making operating conditions extremely challenging for firms operating throughout the construction industry.

” The government has stated that construction is at the heart of its growth strategy for the UK economy and, as it accounts for around 10% of the UK’s economy, it is vital that investment in essential schools, hospitals and housing is maintained at levels that will provide the basis for economic recovery.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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