Spending cuts bite into construction
Published:  10 August, 2010

LONDON: Construction group Morgan Sindall has warned about the impact of sharp public sector spending cuts on the industry.

John Morgan, chair of Morgan Sindall said the company expects the government to reveal cuts of 35% to 40% in construction spending in October. "School building is being cut dramatically, road building will be cut dramatically, and we'll have to wait and see what happens to health and social housing," said

However, he said that a lot of funding for social housing does not come from central government but housing associations and local councils. Morgan Sindall managed to increase its order book in affordable housing to £1.4bn from £1.3bn.

Morgan Sindall Group yesterday announced an increase in its order book as it also revealed a fall in pre-tax profits and revenue compared with this time last year.

The group's profit before tax, amortisation of intangible assets and non-recurring costs for the six months to the end of June was £23.1m on revenues of £982m, compared with profits of £23.9m on £1.14bn revenue for the same period last year.

The group's social housing business, Lovell, could benefit from the problems of rival Connaught, which is close to running out of cash and is in emergency talks with its lenders. But Morgan but warned: "I suspect they have contracts that most people will not be keen to take on."

"I'm more concerned about 2012 and 2013 - we have orders for this year. But we've all been expecting this downturn for some time. Construction is going to be flat to falling slightly over the next two years," said Morgan, who co-founded Morgan Lovell in 1977 before it merged with William Sindall in 1994. Public sector work now accounts for 50% of the company's turnover, down from 60% last year, and is set to drop to 40% next year.

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