Light at the end of the tunnel? Industry prospects for 2010

The current recession has hit construction more severely than most other industry sectors, and conditions deteriorated further during the third quarter of 2009, according to a Construction Trade Survey from the Construction Products Association (CPA). With the economy still in decline, the prospects in most areas of construction appear bleak as orders and enquiries for building contractors, specialist contractors and civil engineering contractors continue to fall, along with sales of construction products, all of which point to the construction industry facing its sharpest fall on record this year with a further decline in output expected in 2010.

In addition, the latest forecasts from the CPA do not anticipate any recovery in the industry's fortunes until 2011.

Despite some encouraging signs that the wider economy may be coming out of recession and that the housing market is beginning to recover, the Association forecasts that construction output will have fallen 15% in 2009 and will fall a further 2% in 2010, before beginning a slow recovery from 2011.

This latest forecast points out that even with trend growth in the industry in the years after 2011, it would take until 2021 for construction output to reach the levels last enjoyed in 2007.

Commenting on the survey, Julia Evans, Chief Executive of the National Federation of Builders, said: "The survey results give a glimmer of hope in falling costs for contractors and a light at the end of the tunnel with predictions of better conditions in 2011. However, the underlying message is still one of intense pressure from falling tender prices, falling demand and increasing unemployment. It is imperative that capital spending is maintained, rather than reduced, to stem the loss of skills and to ensure that there is still a viable industry when the economy recovers."

It's predicted that private housing starts will grow steadily throughout the forecast period, reaching 148,000 in 2013, while commercial new work is falling very sharply and by 2010 is expected to be less than half the size it was just two years earlier, and the construction of factories and warehouses is expected to fall almost 60% between 2007 and 2010. Public investment in schools and hospitals remains strong in 2009 and 2010, but is anticipated to fall sharply in the following years.

Commenting on these latest forecasts, Michael Ankers, Chief Executive of the Construction Products Association, said: "There are signs that the private housing market is beginning to pick up although the recovery is expected to be slow and from historically very low levels. However, even with this new optimism the total number of houses expected to be built in the two years 2009 and 2010 will only equal the number built in the year before the credit crunch."

He continued: "Government spending on construction projects in the short term remains strong and without this the industry would be in a far worse position. We remain very concerned that any significant cut-backs in capital spending after the Election will prolong the downturn as it will be some time before we expect to see significant growth in private sector commercial projects."

2010 looks like being another a tough year.

Related NBS information:

Articles:

• 2010: what to expect

Written December 2009

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