Projects frozen and jobs lost as downturn bites

Evidence of a fall in demand for construction services is growing as more projects are put on hold, jobs are cut and a regional survey predicts workloads will fall next year.

In the past month there has been increasing evidence that the market has turned. A Building survey of its readers has revealed that two major projects in East Anglia have been shelved. One of these has led to five redundancies at multidisciplinary practice RMJM's Cambridge office.

The news coincides with a report predicting workload drops in the South-east and London, the biggest construction markets in the UK.

The report, from construction forecasters Hewes and Associates and the DTI, predicts that workloads will fall 4% in London and 6% in the South-east next year after sustained growth since the mid-1990s.

Martin Hewes, the report's author, described the figures as worrying. He said: "They alone account for up to 40% of the construction market so what is happening here is vital. The signs aren't good."

Hewes' report and Building's survey suggest that the sectors under most pressure are commercial, leisure, telecoms and office fit-outs. Uncertainty is also affecting the housing market, with prices easing in the autumn after strong rises.

The Hewes report also highlighted a downturn in the West Midlands, where workloads will fall 5% next year and fail to grow in 2003.

  The report said: "The commercial market is expected to weaken as the impetus from PFI and other large projects eases and a depressed business environment impacts."

The increase in government spending is providing some support, but Wales, the North and the East Midlands are the only regions in which workloads will increase next year, according to Hewes' report.

What is happening in London and the South-east is vital. The signs aren’t good

Martin Hewes, forecaster

One leading QS said the downturn was deepening. He said: "Tenants are drying up on the office side of the market. I think the commercial market if slowing down quicker than people first expected."

Hewes said contractors were still busy as many projects had started before the uncertainty became so pronounced. He said: "It's the consultants and architects who will be feeling it first as new projects are affected."

A project manager said the slowdown would hit architects and QSs more than contractors. He said: "Contractors are able to switch to public sector work more easily than consultants. Consultants have tied themselves up in a lot of frameworks so will find it more difficult to move to public work at such short notice."

The RMJM job losses came after US drug company Pfizer cancelled plans to refurbish its buildings in Kent. Pfizer blamed the US terror attacks for its decision. A £14.5m Marconi scheme in Cambridge has also been put on hold.

Building revealed two weeks ago (9 November, page 13) that US architects such as Gensler and Interior were shedding staff as US clients shelved projects in Britain.

Michael Ankers, chief executive of the Construction Products Association, predicted that the market would level off but did not forecast a full-scale downturn. He pointed to leisure and office development markets as the two that would be most affected as private investment was put on hold.

Ankers said the market next year would hinge on the extent to which the government kept to its public spending plans.