New figures on construction output and activity point to long and deep recession

According to figures from the Chartered Institute of Purchasing and Supply, published inthis week's Contract Journal, UK construction contracted faster in December 2008 than at any time in the last ten years. The Chartered Institute of Purchasing and Supply/Markit (CIPS) construction index fell to 29.3 in December, the lowest score since records began.

The Construction Products Association added to the gloom by slashing its expectations for the industry. The CPA now predicts it will take until 2013 to return to 2003 output levels.

Building carries a depressing report from construction forecaster Experian that points to a 7% drop in construction output in 2009, regardless of increasing public expenditure.

Building magazine’s monthly business barometer, compiled by Barbour ABI, doesn’t make for much happier reading – the value of work won by the top 30 contractors in December shrunk by more than half compared to December 2007 levels, to just £1.7bn from £3.5bn.

The shortage of work is leading to crowded tender lists and unfeasibly low bids, complained Galliford Try chief executive Greg Fitzgerald. “It’s got much tougher because more companies are looking for work in the public and regulated sectors. That means margins are depressed, and given some of the jobs we’ve lost out on, I’d say some [contractors are winning work at a loss,” he told the magazine.

Building also looked at the impact of the supermarket’s price war on their construction suppliers. The magazine found Tesco slashing its fees by 50%, and high street favourite M&S extending payment periods from 30 to 60 days.

In Construction News, consultant Gardiner & Theobald forecasts a drop in tender prices for the first time since 1992, with a fall of 3.5% expected in 2009 and a further 3% drop in 2010. The firm says that prices will only start increasing again in 2012, by 2%.

CN also reports that contractors are passing on the misery to sub-contractors, with demands for back-dated cuts of up to 10%. Suzannah Nichol, chief executive of the National Specialist Contractors Council was outraged: “[This is] just ridiculous … If you stop to think about how it could work, it is beyond belief. Somebody somewhere has lost the plot.”

But there was some cheering news – if you’re a fan of tall towers anyway. BD has news of three very tall “credit-crunch defying” towers on the south bank of the Thames designed by Swiss architect Herzog and de Meuron for the Sellar Property Group, developer of the Shard.