Construction continues to decline

Published:  11 May, 2010

LONDON: Overall construction activity in the UK contracted for the seventh consecutive quarter in 2010, said the Construction Products Association.

A negative balance of 24% of construction product manufacturers and suppliers saw a fall in sales compared with a year earlier according to the latest Construction Trade Survey published today.

The survey showed enquiries subdued and order books depressed and pressure on raw materials prices continuing to strengthen. Industry expects operating conditions to deteriorate further as 2010 progresses.

Particularly badly hit were manufacturers and suppliers of heavyside products where 75% of heavyside firms reported lower sales volumes, not helped by the adverse weather at the start of the year.

In contrast, those making lightside products saw an improvement in trading conditions as firms started to re-stock. The survey showed improvement in manufacturers' optimism about future short-term trading conditions, but 50% of companies still expect sales to decline in the second quarter, slightly more than the 45% than expect to see improvement.

Michael Ankers Construction Products Association chief executive, said: "Manufacturers and suppliers need confidence that the recovery in the housing market will continue and clarity about public sector spending programmes going forward," he said.

"Without this, future investment decisions by companies in the industry will inevitably be put on hold."

Building contractors also reported falls in output in the first quarter of 2010 with, on balance, 25% seeing output lower than the same quarter in 2009. Of particular concern was that over 50% of contractors stated that orders for work in publicly funded projects such as health and education had declined in the first quarter of the year as a result of a hiatus on the letting of public sector projects in advance of the General Election.

Stephen Ratcliffe, director of the UK Contractors Group said: "The outlook for the industry remains at best uncertain...Rising costs do not help with everybody under pressure, because of the state of the economy, to deliver projects at significantly reduced costs."

Despite the falling workloads, more contractors reporting increasing costs attributed to rising material prices.

Julia Evans, chief executive of the National Federation of Builders said: "With the construction industry still in recession and continuing to experience higher costs and less work, deep capital spending cuts can only make it more difficult to develop skills and deliver on low carbon building targets. It is important to note that none of the major parties pledged to protect construction spending during the election campaign, a sure sign that the industry's contribution to the UK economy is still undervalued."

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