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Construction industry continues to decline

The UK construction industry carried on declining in the last quarter of 2009, according to the latest Construction Trade Survey published today.

Construction industry continues to decline

Despite much of the wider economy seeing a return to growth, the CPA believes that, , with rising material costs and increasing fuel and energy prices, coupled with decreasing orders and enquiries, the environment for construction throughout 2010 is likely to deteriorate even further, delaying any recovery in the sector for at least another twelve months.

Some 78% of heavy side manufacturers reported a ninth consecutive quarter of falling output and 75% anticipate that sales will not grow significantly during the next quarter. This is worrying in that heavyside is usually the first construction sector to see an improvement.

Key findings of the survey are:

  • 89% of light side product manufacturers do not see sales increasing significantly in the first quarter of 2010
  • 91% of building contractors saw order books fall during the fourth quarter of 2009 in the industrial sector – a record low for this survey
  • 75% of light side manufacturers and 33% of heavy side manufacturers saw rising costs, with the majority citing raw material and energy costs
  • 63% of building contractors reported declining profit margins during the final quarter of 2009 due to falling tender prices

    Noble Francis, economics director at the Construction Products Association said: “The continuing decline in workloads across the construction industry is of great concern, especially given that the situation has been exacerbated by rising energy and raw materials costs. This, combined with falling tender prices, is placing increasing pressure upon an industry that has now been in decline for two years.

    “The Chancellor’s confirmation in December 2009 that public spending on construction will fall by more than 50% during the next four years only provides more concern for the industry following last year’s sharpest fall in construction on record and risks delaying any potential recovery in 2011.’

    Julia Evans, Chief Executive of the National Federation of Builders said: “As with previous recessions, construction is still experiencing falls in output as the rest of the economy shows signs of growth. While we can only hope for the government to maintain capital spending at a level that will encourage sector growth, moves to make fair payment a contractual requirement to secure money already earned are very welcome.”

  • About Fiona Russell-Horne

    Group Managing Editor across the BMJ portfolio.

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