Opinion Former Article

Construction Products Association: Construction Prospects Look Increasingly Unsure

The prospects for the construction Industry for the remainder of 2010 are looking increasingly unsure, as product manufacturers report falls in sales of both light and heavy side products for the third quarter of the year and contractors across the industry highlight falls in output for the same period, according to the latest Construction Trade Survey, which has been published today.

Furthermore, both product manufacturers and contractors report considerable fears looking forward, due to the confirmation of a 30% fall in capital expenditure following the government's Comprehensive Spending Review (CSR). This comes despite positive figures from the ONS earlier in the month, that indicated the construction industry enjoyed growth in the third quarter of 2010.

Speaking about the survey, Noble Francis, Economics Director at the Construction Products Association said: 'The Trade Survey for 2010 Q3 highlights that the environment for contractors and product manufacturers is still extremely challenging, especially given that the public sector accounts for more than one third of total construction output and therefore the cuts announced in the CSR will inevitably have considerable consequences for the industry over the next two years.

'Although product manufacturers enjoyed a rise in sales in 2010 Q2, boosted by restocking, this was not replicated in Q3 and sales of both light side and heavy side products fell. 10% of light side manufacturers and 29% of heavy side manufacturers endured a fall in sales during the third quarter. Looking forward, due to the great uncertainty in the economy and in particular in construction, product manufacturers are very unsure. Despite a number of high profile contracts being let within the commercial offices sub-sector in central London, 71% of contractors, on balance, reported that order books fell in the third quarter. Of great concern, in the light of the CSR, 67% of contractors, on balance, reported that order books fell in the third quarter in public non-housing, which covers education and health construction.'

Commenting on the survey Stephen Ratcliffe, Director UKCG, said: 'This survey paints a picture quite different from the official growth figures which suggest - wrongly in our opinion - that construction is the engine driver of economic recovery. Whilst there are still good opportunities - notably infrastructure - the outlook remains uncertain. The new government has made a good start in setting out its public sector investment plans but the whole picture has not yet been filled in - for example the energy white paper is not due out until Easter next year - and there are real concerns that the decentralisation of decision making will slow up both the planning and procurement of new public sector investment projects.'

Julia Evans, Chief Executive of the National Federation of Builders added: 'Despite official figures showing impressive industry growth, the industry's own figures point to a fall in output, falling prices and fewer enquiries. This all points to a depressing Christmas for the industry.'

Key survey findings are:

. 10% of light side manufacturers and 29% of heavy side manufacturers endured a fall in sales during the third quarter if 2010

. 22% of contractors, on balance, reported a drop in output in 2010 Q3

. 23% of light side and 14% of heavy side product manufacturers reported that they anticipated a significant rise during the fourth quarter

. 95% of light side manufacturers and 92% of heavy side manufacturers reported, on balance, that in third quarter of 2010, unit costs were higher than one year earlier, driven by rises in raw materials costs and fuel/energy costs

. 51% of building contractors reported that tender prices fell during the third quarter of 2010 compared to the previous quarter

. 88% of light side manufacturers and 36% of heavy side manufacturers reported that on balance, employment fell in the second quarter of 2010.
19% of light side manufacturers and 18% of heavy side manufacturers, on balance, stated that employment was likely to fall further during the year ahead

Kind Regards,

Avani Raval
External Affairs Executive
Construction Products Association
26 Store Street
London WC1E 7BT
Tel: 020 7323 3770
Fax: 020 7323 0307
avani.raval@constructionproducts.org.uk
www.constructionproducts.org.uk

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