Difficult final quarter for UK

A difficult final quarter of 2012 was endured by the majority of the UK construction industry, the latest Construction Trade Survey from the UK’s Construction Products Association has found.

It said large firms, especially those working in the infrastructure sector, had reported improving conditions, but that the bulk of the industry still faced a very difficult year ahead. This was said to be especially so for those further down the supply chain, who are experiencing a contraction in workload exacerbated by difficulties in late payment.

Noble Francis, economics director at the Construction Products Association, said, “It was good to see a rise in construction output for the fourth quarter compared to the third quarter, when activity was adversely affected due to the Olympics and Paralympics. However, output remains 9.3% lower than a year ago, and this is reflected in the Construction Trade Survey.”

He said, “A minority of firms working on energy and rail projects continue to thrive, as do construction product manufacturers who are able to export outside the EU. Yet, overall, the industry continues to suffer falls in work across both public and private sectors. Furthermore, outside of infrastructure, the industry is expecting that 2013 will be even more difficult, with declining orders and enquiries across the industry.”

The survey found that the private industrial and non-housing repair and maintenance sectors were the worst hit for building contractors, with 34% and 30% respectively, reporting falls in output.

A total of 23% of building contractors reported that, on balance, output fell in the private commercial sector, while output flatlined in private new housing.

Then, 13% of heavy side product manufacturers reported that, on balance, sales fell in the fourth quarter, while 46% of light side manufacturers stated that sales had increased.

While 62% of contractors reported that orders fell in the fourth quarter, civil engineering workloads were flat during the final quarter of the year – an improvement from a negative balance of -17% in the third quarter.

Among large- and medium-sized building contractors, 43% suggested that tender prices had reduced in the fourth quarter, while 30% of building contractors reported rises in costs. This was marginally lower than the 32% in the third quarter. Finally, 46% of contractors reported falls in profit margins, down from 49% in the third quarter.

Stephen Ratcliffe, director of the UK Contractors Group (UKCG), said, “Business conditions remain challenging, and because construction is a lagging indicator, there is unlikely to be any major improvement this year.

“Nevertheless, there remain good opportunities in infrastructure, in the schools programme and energy sector.”

Julia Evans, chief executive of the UK’s National Federation of Builders, added, “The construction industry is braced for a year in which weak demand and higher costs will create a very challenging trading environment.

“As the government and industry collaborate to lay out a long-term strategy for the industry, we must not lose sight of the need to maintain the current capital investment plans that will generate economic growth in the more immediate future.”