The long term outlook for specialist contractors remains tough but tender enquiries are picking up, according to the latest FPDC State of Trade Survey, and contractors are more optimistic about the future than at any stage in the last 12 months.
Government figures released last month by ONS showed that construction output in April fell by 13 per cent compared to March and was 9 per cent lower than the same month one year earlier. Furthermore, ONS also revised the contraction in construction output during Q1, for the third time, to -4.9 per cent. FPDC’s second quarter of 2012 State of Trade survey confirmed that orders are not strong, as Government cuts begin to bite deeper and investor confidence remains low. Overall contractors are more optimistic about the future, than at any stage during the last 12 months.
Steve McGuckin, managing director of the construction and programme management consultancy Turner & Townsend, said: “These latest numbers (ONS) make pretty painful reading. They suggest that the construction industry’s challenges aren’t as bad as we thought; they’re worse. With public sector construction down more
than 22 per cent on this time last year, the impact of the government’s austerity cuts is clear. There have been some signs of life in the private sector, but their impact has been to do little more than mitigate the pain.
“The pain isn’t being spread equally over the regions either with South East England proving more resilient, than almost everywhere else. Demand is still there, but competition for work is very intense. The major players are surviving, even if their margins have got steadily tighter.”
One of the positive findings was FPDC members saying tender enquiries are beginning to strengthen. Nearly a half of respondents say tender enquiries are on the increase compared to only 26 per cent at the start of 2012. Now more than half of FPDC members are reporting fewer new orders than at the end of 2011. And margins are continuing to be eroded as contractors seek to secure forward work.
Over a quarter of survey respondents wait 90 days for payment. The new Construction Act and the introduction of project bank accounts in public work doesn’t seem to be having an effect.
Paul Jessop, chief executive at FPDC, said: “Late payment, withholding retentions and the spectre of insolvencies is having a detrimental effect on business activity which appears to have weakened further since the turn of the year. Measures that create more demand are essential if the sector is to be able to respond when recovery picks up. Vastly expensive civil projects are not helping at all.¨