Good news from Q1 but industry outlook unclear

Published:  04 June, 2012

UK: The construction industry is home to some of the nation’s most optimistic business owners and managers, with more than half (55%) declaring themselves ‘hopeful for the future’ according to the latest quarterly Business Factors Index from Bibby Financial Services.

And, given that the report also found that the number of lapsed customers returning to construction firms more than doubled from the end of last year to Q1 2012 (at 67%), this optimism, it seems, is not unfounded.

However, the Index – which monitors the turnover of Bibby Financial Services’ 4000 UK clients from a base point of 100 alongside the outlook of 500 business owners – shows performance among construction firms fell from 110.6 during Q4 to 93.6 in the first quarter 2012. The figures are in line with the latest Office for National Statistics gross domestic product (GDP) analysis, which revealed the economy contracted by 0.3% in Q1. The fall in GDP is being pinned on a worse-than-expected performance in the construction sector.

Despite the disappointing level of output, the sector has seen increases in the number of firms winning new customers and more businesses are seeking external funds to help secure growth.

The mixed picture for the construction sector follows the release of a report by the Construction Products Association in April, which suggested cuts in public-sector projects could curb growth over the next two years.

Jason Heath, construction finance specialist at Bibby Financial Services, says: “The results from the latest Index make interesting reading for the construction sector, with good news around confidence levels. It is clear from the research that owners and managers of construction firms are taking proactive steps to safeguard their companies from the ongoing threat of the downturn, illustrated by the increase in the number who have moved to manage debt more stringently and pay closer attention to levels of overheads.

“But the increase in those firms seeking outside finance to help fund their business activities is an encouraging sign and it suggests owners and managers in the sector are beginning to examine the full range of funding options available to them and understand the key role it can play in their continued success.”

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