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Construction sector challenges
The south west construction sector is bracing itself for
another difficult year, as the downturn in commercial property
continues to lag behind recession recovery, impacting on
tender prices in 2010 and beyond.
According to the latest research by EC Harris, depressed
workloads are set to further impact on tender prices for
building work in 2010. The official figures indicate that
construction new orders for the South West fell by 21% in
the first nine months of 2009 and this will have a major
impact on construction workload in the region, by 6% over
the next year and by a further 1% over the following year.
Recovery to positive growth is not expected until 2012 when
a slow rise is expected.
The outlook for the infrastructure sector is more positive
however, and current workloads predict that tender prices
will not fall as far, or as fast, as the building sector,
with increases forecast to occur earlier. But expected cutbacks
in government spending following this year’s election
are likely to impact on the industry as a whole.
Commenting, Richard Bonner, head of EC Harris in Bristol,
said: “As clients look for best value increased pressures
are being heaped onto contractors as they face further cuts
to profit margins, to secure reduced opportunities and jobs.
This will be compounded by public borrowing levels, which
are set to cast a shadow over public sector investment with
the inevitable cut in health and education spending this
year. Investment in public housing, brought forward as part
of the government’s 2009 stimulus package, means that
funding levels will definitely fall after 2010.
Whilst the growth of the stock market in 2009 has been welcomed,
borrowing remains difficult as the banks have no appetite
for taking any speculative development risk. However, foreign
investment and equity funds are becoming increasingly active
in the UK real estate market due to the weakness of the
pound and the fall in asset values”, he added.
In contrast to some increases in world commodity prices,
materials’ prices in the UK are now some 17% below
their 2008 peak.
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