The latest Construction Trade Survey shows that the majority of the construction industry endured a difficult final quarter of 2012, due to declining output and orders on the demand side, combined with rising costs on the supply side.

Large firms, especially those working in the infrastructure sector, have reported improving conditions, but the bulk of the industry still faces a very difficult year ahead especially those further down the supply chain, who are experiencing a contraction in workload exacerbated by difficulties in late payment.

Commenting on the survey, Noble Francis, Economics Director at the Construction Products Association said:  ‘It was good to see a rise in construction output for Q4 compared to Q3, when activity was adversely affected due to the Olympics and Paralympics. However, output remains 9.3% lower than a year ago and this is reflected in the Construction Trade Survey. A minority of firms working on energy and rail projects continue to thrive as do construction product manufacturers who are able to export outside the EU. Yet, overall, the industry continues to suffer falls in work across both public and private sectors. Furthermore, outside of infrastructure, the industry is expecting that 2013 will be even more difficult, with declining orders and enquiries across the industry.

Speaking about the survey Stephen Ratcliffe, Director UKCG, said: ‘Business conditions remain challenging and because construction is a lagging indicator there is unlikely to be any major improvement this year.  Nevertheless, there remain good opportunities in infrastructure, in the schools programme and energy sector.

‘Government support in providing guarantees to kick start stalled projects is welcome, as has been the announcement of PF2.  UKCG continues to work with government to see what more could be done to speed up deal flow and increase work available to the industry.’

Julia Evans, Chief Executive of the National Federation of Builders added: ‘The construction industry is braced for a year in which weak demand and higher costs will create a very challenging trading environment. As the government and industry collaborate to lay out a long-term strategy for the industry, we must not lose sight of the need to maintain the current capital investment plans that will generate economic growth in the more immediate future.’

Key survey findings include:

  •  Private industrial and non-housing R&M were the worst hit sectors for building contractors, with 34% and 30% respectively, reporting falls in output
  • 23% of building contractors reported that, on balance, output fell in the private commercial sector, whilst in private new housing output flatlined
  • 13% of heavy side product manufacturers reported that, on balance, sales fell in Q4, whilst 46% of light side manufacturers stated that sales increased
  • 62% of contractors reported that, on balance, orders fell in the fourth quarter
  • Civil engineering workloads were flat during Q4, an improvement from a negative balance of -17% in Q3
  • 43% of large and medium sized building contractors, on balance, suggested that tender prices reduced in 2012 Q4
  • 30% of building contractors, on balance, reported rises in costs, marginally lower than the 32% in Q3
  • 46% of contractors, on balance, reported falls in profit margins, down from 49% in Q3