Consultant reports unexpectedly sharp decline in public sector work
Contractors and housebuilders have been told to batten down the hatches and restructure their businesses amid signs of a sector wide slowdown.
Arcadis’ latest quarterly market report showed a substantially weakened forward pipeline, with a 33% fall in public work, including health and education, and a 27% drop in infrastructure.
New orders fell for the third consecutive quarter, according to the consultant, with viability and dwindling demand hitting housebuilding particularly hard.
Contractors such as Wates, Sir Robert McAlpine and Bam, as well as housebuilders like Bellway, have responded to the gathering stormclouds by restructuring for efficiency and focusing on growth sectors.
Arcadis’ head of strategic research and insight, Simon Rawlinson, said conditions had “deteriorated significantly” over summer and that prospects for the investment economy including housebuilding and commercial development were likely to be “further downgraded” due to stubbornly high interest rates.
“The unexpectedly rapid slowdown in public sector procurement is also a reminder that there are few safe havens for workload other than net-zero and fire-safety retrofit which still see strong demand,” he said.
“Our central prediction for the period from 2023 to 2025 remains low inflation, not deflation. However, in the light of worsening data, particularly in connection with the housebuilding sector, we highlight that there is now a material downside risk of a competitive price correction in 2024.”
Arcadis stuck with its tender price forecasts for this year – 2% for building and 5% to 7% for infrastructure.
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