Prospects “still poor” as construction activity falls in Q1

Published:  13 May, 2013

The latest Construction Trade Survey, published today (13 May), shows that activity in the majority of the construction industry fell during the first quarter of 2013 with the impacts of falling demand exacerbated by the impacts of poor weather.

Looking forward, industry prospects remain downbeat with contractors, specialists and civil engineers all reporting declining orders for future work.

Commenting on the survey, Noble Francis, economics director at the Construction Products Association, said: “The weather in January and March undoubtedly had a negative effect on activity in construction and, as a result, we would expect to see a degree of catch-up in the second quarter. However, prospects for this year are still poor with a subdued private sector and continuing austerity affecting most sectors of the industry. Overall, construction output is expected to fall 2 percent this year but private housing and infrastructure are potentially looking more positive and could be drivers of growth for the industry next year. Also, product manufacturers are looking forward with some optimism and are anticipating that exports could boost sales.”

Stephen Ratcliffe, director for UKCG, said: “The fall in construction output is not unexpected. Market conditions remain challenging, and as a lagging indicator construction will trail behind growth in the wider economy. However, there are some positives in the latest survey – improving sentiment amongst major players and better prospects in housing and infrastructure – and construction remains a £100bn sector and a major contributor to jobs and output. Government has recognised the importance of the sector, and the industry is working with Ministers to bring projects forward and build confidence.”

Julia Evans, chief executive of the National Federation of Builders, added: “Output, especially among SMEs, has continued to fall. However, in each of the last three years between February and March, there has been a marked increase in construction output. We can only hope that despite construction companies continuing to have difficulties accessing finance, that history repeats itself and that construction will soon be able to report positive growth. To enable the construction industry to thrive past this point, what we need to see from the Government is the delivery of its many schemes and a laser-like focus on ensuring that the schemes benefit those they were intended to help, and within a reasonable timeframe.”

Key survey findings include:

  • Ten percent of building contractors reported that, on balance, output in private commercial work continued to fall yet all building output flatlined
  • Private housing and non-housing R&M were the worst-hit sectors for building contractors, with 29 percent and 12 percent respectively, reporting falls in output, on balance
  • Thirty-nine percent of heavy and 38 percent of lightside manufacturers reported an annual contraction in sales in Q1, on balance
  • Civil engineering workloads were broadly flat in Q1 for a second consecutive quarter with a balance of 1 percent recorded
  • A quarter of contractors reported that, on balance, orders fell in the first quarter
  • Eleven percent of large and medium-sized building contractors, on balance, suggested that tender prices reduced in the first quarter of 2013 compared to 43 percent in Q4
  • Forty-three percent of building contractors, on balance, reported rises in costs, an increase from 30 percent in Q4
  • Twenty-seven percent of contractors, on balance, reported falls in profit margins down from 46 percent in Q4.

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