Construction faces worst year on record

The construction industry is facing its worst year on record and will not start to recover until 2012 warns the latest report on the sector.

The Construction Products Association closely watched state of trade survey for the first quarter reveals a bleak picture of the industry and warns of further deterioration in the market next year.

The survey said the industry has lost 10% of its workforce, around 250,000 people, over the last 18 months and warns the figure will rise throughout this year as large scale capital projects fail to move off the drawing board and onto site.

The CPA said the industry’s recovery prospects had been “severely hindered” by last month’s Budget which it said provided “a stark warning” that public sector spending will fall sharply.

The report revealed sharp falls in output across all sectors of the industry.

During the first quarter 62% of building contractors reported a fall in output along with 47% of civils contractors. Manufacturers appear to have been hardest hit with all heavy side manufacturers and 91% of light side manufacturers stating that sales have fallen significantly.

Although the recession has reduced cost pressures for businesses, the fall in demand has led to a sharp fall in profit margins across all sectors.

More than 86% of building contractors, 42% of civils firms and 74% of specialist contractors reported that profit margins had fallen despite falling labour costs.

The CPA survey combines data from each main area of the construction industry in one survey, covering building contractors, civil engineering, specialist contractors and construction product manufacturing.