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Downturn Accelerating, says CPA

The latest Construction Trade Survey shows that a combination of falling demand and rising costs hit the construction industry hard during Q3 and this is only adding to the sense of pessimism over the future.

Noble Francis, economics director at the Construction Products Association said: “Construction output weakened in Q3 and order levels were depressed across the board which is bad news for the industry.

“Sales of the products that are typically used in the early stages of the construction process fell significantly largely due to the sizeable cuts in public sector capital investment, which are now beginning to feed through.

“Furthermore, the private sector shows no signs of being able to take up the slack with contractors’ new orders for private sector work being equally depressed. All of these factors are reflected in the Association’s latest forecasts, which expect construction output to fall by1.1% in 2011 and 3.6% in 2012, with no return to growth until 2014.”

Key survey findings include:

  • 44% of heavy side firms now expect sales to reduce next year compared to just 14% three months earlier. Also fewer light side manufacturers now foresee growth in 2012.

  • Two-thirds of medium and large contractors reported that activity was either stable or lower than at the same time last year.

  • SME builders reported that workload declined for the 15th consecutive quarter which is especially significant given that 70% of industry output is generated by firms employing less than 299 people.

  • Cash flow is now a real concern with only 2% of specialist contractors having received payment within 30 days in Q3.

    Francis said: “Although we recognise the need for government to reduce the economic deficit, it is critical that growth is kick started through investment in areas of long term benefit to the UK, such as housing and infrastructure. This could be realised by bringing forward finance allocated for future years and doing more to create a framework whereby financial institutions are confident enough to invest.”

    Julia Evans, chief executive of the National Federation of Builders said: “Construction continues to struggle. What the industry needs now, perhaps more than ever, is a shot in the arm – targeted investment that frees up stalled projects and unlocks growth.”

  • About Fiona Russell-Horne

    Group Managing Editor across the BMJ portfolio.

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