Government plans fail to get infrastructure moving

Published:  18 July, 2012

UK: The amount of infrastructure construction projects failed to pick up during the second quarter of 2012, despite the government’s ongoing attempts to boost the sector through private sector investment, says the latest RICS Construction Market Survey.

Infrastructure workloads across the UK were flat during the three months to June (net balance -4 percent), and little movement has now been seen in the sector since the end of 2009. This is despite attempts by the government to stimulate the economy through privately funded infrastructure projects.

This low level of activity was reflected across the entire construction sector with four percent more respondents reporting falls rather than rises in workloads. However, it is the public sector where the pressure continues to be greatest.

Perhaps unsurprisingly, given the economic climate, profit expectations continue to deteriorate, with the net balance falling from -18 to -26 percent, reflecting the continuing pressure on margins as input costs rise more rapidly than output prices. Surveyors note that increasing competition is leading some companies to bid for work at below cost price in order to secure contracts.

Regional variations were once again evident across the UK, as the South, Wales and the Midlands saw overall workloads stabilise, while the North, Scotland and Northern Ireland experienced further declines.

Looking ahead, in spite of the downbeat picture for the sector over the three months to June, surveyors are cautiously optimistic, with a net balance of 16 percent more surveyors predicting workloads to rise over the coming twelve months.

Simon Rubinsohn, RICS Chief Economist, commented: “Infrastructure workloads failed to pick up despite the government’s attempts to boost the sector through private investment. More action to back up the rhetoric is urgently needed if the construction industry is to play a meaningful role in driving the economy forward over the next few years.

“Ominously, profits continue to be squeezed with some surveyors are reporting that increasing levels of competition are leading some companies to bid for work at a below cost price in order to secure contracts.”

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