UK faces ‘challenging’ year

Expectations for the year ahead in the UK construction trade are largely negative as the public sector retrenches and private sector sentiment remains weak, according to the latest Construction Trade Survey from the Construction Products Association.

Stephen Ratcliffe, director of the UK Contractors Group, said the survey highlighted that the situation for contractors had improved in the first quarter compared to the weather-affected final quarter of 2010.

"However," he added, "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. 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."

The Construction Trade Survey brings together information from contractors, product manufacturers, specialists and civil engineers.

Noble Francis, economics director at the Construction Products Association, said, "This survey highlights that construction improved during the first quarter of the year, contrasting sharply with the ONS's (the government's Office for National Statistics) construction output figures that indicated construction fell -4% over the same period."

He added, however, that this improving situation was being compared to the final quarter of last year, which had been badly affected by poor weather in November and December.

"The industry's near-term future is likely to be extremely challenging with domestic demand remaining subdued, exacerbated by expectations of further rises in fuel, energy and materials costs."

Only 43% of contractors reported that, on balance, activity rose during the first quarter of 2011 compared with the same period in 2010. Materials costs increased in the first quarter of 2011 compared to the final quarter of 2010, according to 71% of contractors.

The survey also found that 77% of heavy side firms and 88% of light side firms felt that costs had risen over the past year, while 56% of heavy side firms said that heavy side sales volumes had grown.

Julia Evans, chief executive of the National Federation of Builders, said, "Once again, the industry is working through a difficult set of challenges with rising costs, falling margins and lower demand.

"However, an obsessive focus on quarterly figures risks losing sight of the bigger picture. The overall downward trend is not encouraging. As long as the fundamental issues of difficulty with access to finance and prioritising cost over value remain, the trend is unlikely to be reversed."