The world is about to get nastier for construction. Having endured months of uncertainty and finger-in-the-air budgeting, you’ll no doubt want to wrap your 2010 numbers up and dump them in the bin, along with those of 2009 and 2008
But without wishing to be a doom-monger, we’ll need to brace ourselves for more of the same over the next couple of years as pipeline work looks set to remain stagnant. UK construction growth is forecast to turn negative until 2013, which will worry companies of all sizes striving to unravel public sector spending maps and disjointed government regeneration policy.
Forecasters and naysayers are predicting a bottoming out of the market in 2011 and a triple-dip construction recession
Behind the pessimism are a set of forecasts and data - and the first eagerly awaited figures to follow the Comprehensive Spending Review. In short, the forecasters and naysayers are predicting a bottoming out of the market in 2011 and a triple-dip construction recession. Private sector work is to increase marginally but a 17% contraction in public sector work, a 40% drop in social housing and a near halving of education expenditure drowns out the possible upsides. There is a glimmer of hope with investment planned for transport and infrastructure, but, as Building has been at pains to record, this investment is largely confined to London and the South-east and focused on large projects.
What’s more, it looks like we’re on a collision course for more disputes within the industry. KPMG’s global construction review shows that margins are increasingly taking a beating and the only signs of growth seem to be on international shores. The worrying picture to emerge is that companies are pricing work at break-even levels to stay in the game and keep onside with clients. Anecdotal evidence points to these same firms trying to win back their margins at adjudication, having taken a confrontational contractual position.
Gone are the days of major companies buying work to grow and cement their positions as market leaders in their sector and to capture all the benefits of economies of scale that come with it. This climate continues to be about survival and, increasingly, conflict.
The government’s gripes with the scrapped Building Schools for the Future programme have been well documented: a complicated and often costly procurement system, inexcusable waste in the design process and an appallingly slow start which meant that the scheme was always playing a losing game of catch-up with its initial targets. And the industry, by and large, agreed - not that this made the pain of Michael Gove’s bungled cancellation of the programme in July any easier to bear. The big hope is that the government’s review of future procurement, led by Sebastian James, will mean that the same mistakes won’t be repeated - and that any money left will now be used both quickly and efficiently. So it is disappointing that the report’s interim findings, delayed since September, are expected to focus on going over old complaints when they are finally published at the end of this week. By all accounts, James and his team have a lot of ideas on how to cut waste out of the process. The best thing they can do now is to get these ideas out into the open quickly, so we can get on with building schools again. Wait any longer and the expertise the industry has built up in this area will start to disappear.
Tom Broughton, brand director