Industry blames pre-election nerves and rising costs for winter dip in workload and profits

Construction workloads continued to fall in the last quarter of 2009, according to the RICS. This means the industry has now been in recession for almost two years.

The institution’s study showed that workload has been shrinking for seven quarters. The balance of those reporting a rise minus those reporting a fall was –12 percentage points in the final quarter of 2009 compared with –6 points in the previous quarter.

RICS members blamed a lack of development finance and political uncertainty for the fall. Nick Townsend, director of Turner & Townsend, said: “Uncertainty around public spending is causing nervousness. The private sector is still extremely cautious, despite more positive indicators.”

The public sector enjoyed the most stable workload at –5 points. The private industrial and private housing sectors contracted sharply in comparison at –19 and –17 respectively.

We expect public spending to crash and burn in April, whichever party wins the election

Charles Nixon, QS

Charles Nixon, director of Preston-based QS Thornber & Walker, said: “Public spending should hold up until the financial year end and we then expect construction spending to crash and burn following the election, whichever party is victor.”

Contractors faced similar difficulties, with 63% reporting declining profit margins in the final quarter of 2009, according to research from the Construction Products Association (CPA).

The trade body blamed rising materials costs, fuel and energy prices and decreasing orders and enquiries. Noble Francis, economics director at the CPA, said: “This, combined with falling tender prices, is increasing pressure on an industry that has been in decline for two years. The CPA does not anticipate a recovery for another 12 months.”

Meanwhile, business monitor Experian this week found that month-on-month activity in the non-residential sector expanded for the first time in 21 months in December. Tender prices also edged up correspondingly.