Medium-term recovery possible for UK

22 April 2013

Construction output in the UK is set to fall by more than 2% this year, following an 8% contraction in 2012, according to the latest forecasts from the Construction Products Association.

A recovery is expected in the medium term, though, with growth of 1.9% in 2014 and 3.8% in 2015.

Meanwhile, first quarter sales survey results from the UK’s Mineral Products Association (MPA) indicated a further decline in construction activity. It said that the survey also showed the urgent need for accelerated delivery of promised funding and projects.

News of Britain’s smaller building firms is also gloomy, with almost a third having shed staff since the turn of the year, as falling workloads and rising costs have forced many SME construction companies to scale back their operations. This is according to new research from the Federation of Master Builders (FMB).

Noble Francis, economics director of the Construction Products Association, said, the industry had lost £9 billion (€10.5 billion) of activity last year and these latest forecasts led to the expectation of a further £2 billion (€2.3 billion) loss in 2013.

“This fall,” he said, “is primarily due to the lack of private sector investment and the continuing bite of public sector spending cuts. Conditions were exacerbated by poor weather during the first quarter.

“Of most concern is the fall in output in private commercial, the largest construction sector, which fell 10% last year and is estimated to fall a further 7% in 2013.”

He added, “Despite this, we are already encouraged by signs of improved market activity, primarily driven by private housing and infrastructure.”

Mr Francis said that the Construction Products Association predicted that government policies such as Help to Buy – a package of financial support announced recently by the Chancellor of the Exchequer in his Budget, aimed at tackling long-term problems in the housing market – would boost private housing, which is expected to rise 19% in just two years.

“Infrastructure activity is set for 7% growth in 2013, boosted primarily by rail construction such as Crossrail, Europe’s largest project, and station refurbishments around the country,” he said.

While overall, 2013 was forecast to be extremely challenging, prospects from 2014 were said to be brighter for the industry, but the key risk was the extent to which government announcements would feed through to activity on the ground.

Aggregates down

The MPA survey results for the first quarter of 2013 confirmed the slow start to construction activity in 2013. Compared with the first quarter of 2012, sales of construction aggregates fell by 7%, ready-mixed concrete by 4% and asphalt by 18%. Sales of cement were considered likely to reflect a similar picture to concrete.

Although the MPA said that first quarter construction data could be significantly impacted by adverse weather, and caution was required in interpreting data, the underlying trends for mineral product sales into construction were said to remain significantly negative.

It said the very poor asphalt figures followed a decline of 18% in 2012, and reflected a very sharp reduction in road maintenance and construction activity over the past 15 months.

The MPA pointed out that the UK government’s Office for National Statistics (ONS) data indicated that road construction fell by 41% in 2012, and that the government had announced additional funding for road maintenance and construction projects in England in its 2012 Autumn Statement.

“Given the precipitous decline experienced in road markets, allied to the increasing evidence of worsening road conditions, it is essential that the allocated funding increases are turned into projects as a matter of urgency,” said the MPA.

Shedding staff

Almost a third of Britain’s small building firms have shed staff since the turn of the year, according to the FMB.

The FMB’s latest State of Trade Survey of member firms shows overall workloads are falling at the fastest rate since early 2012. The net balance for residential workloads was -23%, compared to -15% in the final quarter of last year, giving particular cause for alarm.

Brian Berry, chief executive of the FMB, said, “Last year was a tough one for our members, but there were some encouraging signs in the final quarter of 2012 that the industry may be turning a corner. These latest survey results, however, paint a bleak picture, and our members are telling us that they are faced with the unenviable choice of putting up their prices or laying off staff.”

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