More depressing indicators of the depressed state of the construction market emerged this week as Bank of England governor Mervyn King cut growth forecasts for the wider economy.
The UK is now a cheaper place to build than countries such as Qatar and New Zealand, a report by consultant EC Harris has found.
The annual International Construction Costs Report, which benchmarks building costs in 53 countries across the globe, found the UK had slipped two places from 13th in 2011 to 15th in 2012, when each market was ranked according to the cost of construction, with the most expensive country at the top.
Although when ranked alongside all the other European markets the UK actually moved up a place, rising from 8th in 2011 to 7th in 2012, due to prices dropping more severely in Italy than in the UK over the past 12 months.
Conversely, construction costs in markets that have been less impacted by the global recession are continuing to increase with countries such as Canada, Australia and Qatar all moving up the league table compared with their 2011 position.
Mathew Riley, group head of cost and commercial at EC Harris, told Building: “Those countries that are least constrained by debt problems are continuing to invest in construction activities to help fuel their continued growth.
“In the UK, however, a slow economic recovery combined with a lack of private investment, means that construction workload is unlikely to increase until 2014 at the earliest.
“London’s office sector is a potential bright spot, however even then market uncertainty and difficulty in securing funding means that opportunities may not be fully realised.”
Meanwhile, the Insolvency Service’s official insolvency statistics which came out on Monday showed a loss of 868 construction firms in the last quarter alone, a total of 5,460 construction firms out of business since January 2011 and 6,146 since September 2010. The only good news was that the number of firms out of business was 6.06% lower than in the first quarter.
The figures showed that a 12% rise in the number of construction companies forced into compulsory liquidations compared to a drop of 13.9% across all other business sectors; construction and property firms also made up 23% of the total number of all businesses in England and Wales forced into compulsory liquidation, which would suggest that the banks are becoming less tolerant of struggling construction companies and forcing them out of business.
In comparison, the number of voluntary liquidations dropped by 15% but still make up 15.6% of companies across all sectors in England and Wales voluntarily entering liquidation.
Alan Harris, director at specialist construction risk management firm CR Management, said: “The construction industry continues to jog along the rough and uneven road to recovery which now looks to be a long way off. As a consequence a number of main contractors that we are working with are looking again at their structures with a view to making further efficiency cuts in order to compete in the current and projected market and more will follow suit, although for some they will have left it too late.”
The grim construction statistics come as the Bank of England slashed its 2012 growth forecast to zero and said it would not be until 2014 that activity would return to its pre-recession peak in 2008.
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