Construction firms least confident about post-recession growth

Construction firms are the least confident of all businesses across the sectors about growth prospects in the next six months, even if government figures from June to September are expected to show an overall growth of the UK economy and spell out the end of the recession.

56 percent of the construction firms included in the business confidence report released by banking group Santander witnessed a profit drop in the first half of the year; 21 percent reported a 10-20 percent decline in the first six months and 28 percent saw their profits drop by more than 20 percent.

At the same time, 12 percent of the construction firms had a rise of more than 20 percent, while four percent reported a 10-20 percent increase.

According to the survey, only 15 percent of the construction and building businesses are very confident, 58 percent are confident, 24 percent are not very confident and three percent are not confident at all that their profits will increase. 22 percent of the construction firms cited forward orders as the main indicator of confidence.

“Our research indicates that there is a lower level of confidence and optimism amongst construction and building services businesses compared with other sectors,“ said Steve Paterman, head of Santander Corporate Banking. “It is important that the banking sector supports these businesses and helps them to turn their confidence into profits. Banks need to learn from the downturn and build stronger relationships with their customers in order to provide solutions that will help their stability and growth.”

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Construction jobs stabilise in Northern Ireland and Scotland

Jobs in the construction industry will likely stabilize in the second half of 2009 in terms of new building contracts, according to Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, even if it is still too early to speak of the 'light at the end of the tunnel.'

The residential sector has been the most affected one by the current economic crisis, but the commercial developments sector is also facing problems in the downturn.

Rubinsohn explains, "We've probably seen the worst of the collapse in output, but I'm not sure [it will] take off very quickly. It's going to be a fairly long haul, but we've probably seen the worst of the adjustment downwards."

The construction industries in Northern Ireland and Scotland have stabilised somewhat because of the rise in public sector building contracts according to June’s Glenigan Index.

Scottish construction industry has witnessed some peaks recently, mostly thanks to the civil engineering sector, in which the number of project starts grew 50 percent last year.

The utilities sector recorded a 16 percent rise in the value of planning approvals in 2008 and has stayed strong in the first four months of 2009. A number of wind farm construction plans are underway and Scottish Water is expected to continue with a strong investment program.

The private housing construction in Scotland, on the other hand, has been hit hard by the crunch: in the five months leading to May 2009, project starts fell by half compared to the previous year and are now at a three years’ low.

Experts predict that the construction sector in Scotland will improve in 2010. While the value of underlying construction starts will fall by 2 percent this year, a modest return to growth is expected in 2010.

In June, the Scottish Government announced construction plans for 1,343 council homes – a project worth £26m – and housing and communities minister Alex Neil acknowledged that the sector had been overlooked of late, but said that things were looking up: “Scotland’s housing stock has been left to wither on the vine. Backed by record funding, we are now working with councils across Scotland to reverse decades of decline in council house building.”

Commenting on construction industries in all regions in the UK, Glenigan economics director Allan Wilén said: “Glenigan forecasts that the recent recovery in public sector starts will gather momentum during the second half of 2009. This will drive the overall stabilisation in construction project starts. Growing pressure on Government finances will temper this momentum in the medium term, however.

“We expect the current divergence in between the housing sector to widen over the coming months with an increase in social housing projects contrasting with a depressed private sector development which remains constrained by poor conditions in the wider housing market. The fortunes of non-residential construction will be mixed. Civil engineering projects starts will strengthen as new renewable energy, rail and road schemes commence.”

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Construction market survey: workloads continue to weaken in Q1

Construction workloads continued to fall in the first quarter of 2009, according to a new market survey from the Royal Institute of Chartered Surveyors. About 45 percent of the surveyors who participated in the survey said that overall construction workloads fell in the first three months this year up from a net balance of -47 percent.

The bleakest figures come from the private commercial and industrial workloads sectors, where the respondents reported net balances of -57 and -61 percent respectively.

There was, however, an easing in the pace decline on the housing market. "This slight easing we are seeing in both public and private housing is broadly in line with the figures coming from the Government on the number of housing starts, which saw a small rise in the first quarter of 2009, and could be aligned to recent signs of a gentle pick-up in the housing market," said Simon Rubinsohn, chief economist at the Royal Institute.

Almost a half (46 percent) of the surveyors expect employment levels to drop, while as many as 72 percent believe that profits will be down in the coming months. "Despite some sub-sectors showing slightly more positive signs, construction output is likely to post a double digit drop over the course of 2009 with a further loss of employment and skills in the industry," Rubinsohn concluded.

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