Industry uplift in Q1, but outlook remains downbeat says survey
The construction industry has demonstrated its resilience in the first three months of 2011, according to the Bibby Financial Services Business Factors Index, by overcoming the knock-on effect of the severe weather at the turn of the year and the heavy cuts in public sector spending, to report the highest monthly reading for a year in March.
The March Index figure of 119.3 comes after a January reading of just 72.7, the lowest reading for 12 months. Despite this recent turnaround, construction firms remain concerned about the state of the market with 44% reporting conditions are tough and they are only just surviving, and only one per cent feeling the economy is showing real signs of a recovery.
The results of the survey come as Barbour ABI survey reveals 39% drop in value of new work and a survey showing that almost a quarter of architects expect their workload to fall.The figures from the RIBA’s monthly survey show that 23% of architects expect workloads to fall, with a balance of 9% more architects saying they were expecting to reduce rather than take on staff in future. In total architects were marginally positive, with the workload index staying at +8%.
On top of this, the latest figures from the CIPS/Markit PMI reveal slower growth than expected in the construction sector moving into April, raising fears among many experts that the UK economy is flagging.
The Bibby Index, which tracks the turnover levels among 3,000 of Bibby Financial Services’ UK client-base alongside the outlook of 300 business owners, also found:
- 39 per cent of construction firms feel business is worse than a year ago
- Over half (56%) of firms in the industry are managing suppliers more carefully to prepare for further economic challenges
- 43 per cent think we could feel the effects of the recession for at least three years, more than any other sector
- Nearly a third (31%) of the construction industry think reducing VAT back to 17.5% would stimulate a recovery
Jason Heath, construction finance specialist at Bibby Financial Services, said: “While the construction industry is showing signs of growth in recent months, the impact of the worst winter in a 100 years and the implications of further cuts to public spending and investment is having a serious effect on business outlook.
“Many business managers and owners are facing cash flow headaches as the banks are reluctant to lend to the construction sector as it is viewed as a high risk industry, due to the level of insolvencies, and with uncertainty continuing around the stability of the industry, this problem is likely to get worse.”