Opinion Former Article

CPA: Public Sector Cuts Finally Start to Bite

Public Sector Cuts Finally Start to Bite

The latest Construction Trade Survey published today, shows that the cuts to public spending, announced by the government last autumn, have finally started to impact on construction activity, confirming the fears the industry has warned about for some time.

Whilst these latest indicators reflect the scale of government retrenchment in the public sector, anaemic economic growth, a beleaguered consumer sector and the continuing reluctance of financial institutions to increase their exposure to the built environment, are all restricting the private sector recovery.

Commenting on the survey, Noble Francis, Economics Director at the Construction Products Association said: ‘Construction activity fell in most sectors during the second quarter, with only a small rise in private commercial activity preventing even sharper falls. The greatest falls were seen in public non-housing such as education and health and with the public sector spending cuts already taking effect this will only exacerbate the situation. Furthermore, at a time when tender prices and profitability remain under extreme pressure, persistently high materials price inflation is making operating conditions extremely challenging for firms operating throughout the construction industry.

Some manufacturers during Q2 benefited from Sterling’s attractiveness relative to both the euro and dollar and increased their export sales, resulting in an additional 18 per cent of manufacturers turning to overseas markets compared with the previous three months. This has been a welcome bounce back from the poor conditions experienced during the winter months, but there remains a great deal of concern regarding the year ahead given that we have not yet seen the full impact of the public sector cuts and the Association forecasts that construction output will fall in 2011 and 2012. The government has stated that construction is at the heart of its growth strategy for the UK economy and, as it accounts for around 10% of the UK’s economy, it is vital that investment in essential schools, hospitals and housing is maintained at levels that will provide the basis for economic recovery.’

Speaking about the survey Stephen Ratcliffe, Director UKCG, said ‘Market conditions remain tough. Government has not just cut back on capital investment. It is also reviewing many programmes (such as school building) and is devolving responsibility to local decision makers. Hence, the picture on forward public investment remains pretty murky. Clarifying this is the single most important step government could take to help the industry ride out these tough times.’

Julia Evans, Chief Executive of the National Federation of Builders added: ‘It is still of great concern to members of the National Federation of Builders that lending to construction continues to fall, dampening the prospects of a private sector-led recovery. Construction experienced the highest rate of insolvencies of any industry in the second quarter, a sure sign that weak demand, extremely competitive pricing and rising costs are all having a destructive effect on the industry which will continue to be felt for years to come.’

Key survey finds are:

· Product manufacturers benefited from growth in overseas sales in 2011 Q2 and 22% of heavy side and 34% of light side manufacturers expect sales growth to exceed 5% during the next 12 months. Elsewhere in the industry the outlook is subdued.

· 37% of building contractors, on balance, reported activity contracted between 2010 Q2 and 2011 Q2.

· Public non-housing work reduced according to 50% of contractors, on balance, during the year.

· SME builders reported that workload declined for the 14th consecutive quarter, according to 19% of firms, on balance.

· 77% of contractors and over 90% of product manufacturers, on balance, suffered higher materials costs year-on-year in 2011 Q2.

The Construction Products Association represents the UK’s manufacturers and suppliers of construction products, components and fittings. The Association acts as a single voice for the construction products sector, representing the industry-wide view of its members. The sector has an annual turnover of £50 billion and accounts for 40% of total construction output.

The Construction Products Association undertakes a comprehensive quarterly survey of its members operating across this sector.

The National Federation of Builders (NFB) represents over 1,500 builders and contractors across England and Wales. In addition to providing specialist advice and business services, the Federation, with a network of eight regional offices, lobbies local, national and European government on a range of issues to sustain positive trading conditions for members. With origins dating back to 1876, today's NFB is a modern organisation providing the medium sized contractor and smaller builder with an unparalleled package of services.

The National Specialist Contractors Council (NSCC) brings together the common aims of specialist trade organisations within the construction industry and is the authoritative voice of Specialist Contractors in the UK. NSCC has 32 member organisations that collectively represent over 7,000 Specialist Contractors engaged in the planning, design, construction, refurbishment and maintenance of the built environment in both the commercial and domestic sectors. By using the collective strength of the specialist sector, NSCC has the influence to make a real difference to how the UK construction industry operates.

The Civil Engineering Contractors Association has over 300 member firms that carry more than 80% of all civil engineering work in Great Britain. The CECA survey of civil engineering workload trends, in which more than a third of the membership takes part, tests for changes over the past year in contractors’ workload, workforce, order books, cost trends, and tender prices. It also examines the supply situation for key resources, and contractors’ expectations of trends in new orders and employment in the coming 12 months.

The UK Contractors Group represents more than 30 leading contractors operating in the UK. Its mission is to represent contractors’ interests to government and key clients and to encourage contractors to work together to promote change and best practice, especially on health and safety and environmental issues. UKCG also works closely with the CBI Construction Council to ensure that contractor’s interests are properly reflected in the wider business agenda.

The FMB is the largest employers’ body for small and medium sized firms in the construction industry, and with 11,000 members, it is the recognised voice of small and medium sized builders. FMB is committed to promoting excellent standards in craftsmanship and assisting builders to improve levels of building performance and customer service. Within its membership, the FMB has around 4180 firms which engage in house building, either as their primary function or as part for the suite of building services they provide, but most are primarily active in the domestic RM&I market.


Noble Francis, Economics Director
Construction Products Association
Tel : 020 7323 3770
Mobile: 0791 261 2882
Fax : 020 7323 0307
E-mail : noble.francis@constructionproducts.org.uk

Simon Storer, Communications and External Affairs Director
Construction Products Association
Tel: 020 7323 3770
Mobile 07702 862 257
Fax: 020 7323 0307
E-mail: simon.storer@constructionproducts.org.uk

Sarah McMonagle
External Affairs Manager
Construction Products Association
26 Store Street
Tel: 020 7323 3770
DDI: 020 7323 7246
Mob: 0755 4422 900
Fax: 020 7323 0307

Registered Office as above
Company Number: 386 1752
Registered in England 

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