Constant speculation about a possible recession isn’t doing the industry any good
Everyone seems to be talking about a possible recession. You cannot go to a meeting without the echoing of questions such as “What’s your view on a possible recession?” or “Have you experienced a tightening of the market?” These conversations are not limited to the construction field but have also been commonplace among my social peers, enforcing the feeling that the threat of a recession is at the forefront of many people’s concerns.
These comments refer to the supposed “credit crunch” that has dominated the headlines for several months. The continuous bombardment of potential slumps in consumer spending, increased repossessions and reduced lending has caused growing nervousness in the construction industry. People are on edge, with many seemingly convinced of a pending recession.
There is no doubt that many aspects of the financial markets are in turmoil. The unfolding problems with the US subprime mortgage market give reasonable grounds for concern, given our close ties with the Americans. The US has moved to address these issues by reducing interest rates and the Bank of England has done the same, but the problem is convincing lenders to pass on these reductions.
However, the future may not be so bleak. There are many reasons why the UK construction industry should continue to grow in the short term, regardless of the US economy – major commercial schemes already under way, the 2012 Olympics, large public-sector programmes such as Building Schools for the Future, a requirement for new power stations and major infrastructure upgrades such as Crossrail, and airport expansions. With these in mind, does the future still look so uncertain? Or are schemes such as the Olympics only delaying the impact of a potential recession?
What is unlikely to help the industry is the continuous speculation among construction professionals about a downturn, as this can only undermine confidence further. Confidence is the key to a vibrant economy. Is it possible that we are talking ourselves into a recession?
Joe Connolly is assistant cost manager at Turner & Townsend.