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Editorial

Watts Bulletin (Issue 131)

A combination of low demand and rising costs hit the construction industry hard in the last quarter, according to the latest Construction Trade Survey published by the Construction Products Association (CPA). However, despite weak output and gloomy prospects for at least the next two financial years, the construction industry still represents nearly 10% of GDP and employs more than two million people. In a speech to more than 500 leading industry guests in November, CPA chairman Bill Bolsover highlighted the myriad ways in which construction is a vital engine of the UK economy. The Government regards the industry as one of the cornerstones of economic growth, expecting it to deliver the low carbon economy of the future, create the infrastructure to improve business competitiveness, build the nation’s capacity in both nuclear and renewable energy and provide the housing that the country so badly needs, he said.  Bolsover then pointed to the fact that despite its importance, construction still lacks a collective voice with which to represent itself to government and called on the industry to “pool our resources, our thinking and our influence”. This is a message that has been delivered before, with varying levels of success and resulting in countless industry alliances, forums and groups. It will be interesting to see whether or not the CPA chairman’s call to arms is ultimately more successful.

As well as the CPA’s Trade Survey, on the following pages you will find an introduction to the Energy Act 2011, which came into force in October and has implications for landlords, their tenants and advisers in both the residential and commercial private rented sector. We also look at new guidance from the Building Research Establishment (BRE) on daylight and sunlight amenity – an often misunderstood area of planning law – and radon. This is a workplace risk that all employers must be aware of, even if that risk in many places is very small. Still on the topic of health and safety, we report on the proposed changes to the control of asbestos regulations, which are vitally important to all in the industry whether landlords, tenants or employees, particularly in light of the recent £1m fine levied against Marks & Spencer. Finally we take a look at the new Localism Act, enacted in November.

Watts Bulletin (Issue 131)

Construction faces accelerating downturn

The latest Construction Trade Survey published by the Construction Products Association (CPA) paints a gloomy picture of construction output.

Downturn_Main

A combination of falling demand and rising costs hit the construction industry hard in the third quarter of 2011, with order levels depressed across the board. Cuts in public sector capital investment are now beginning to be felt as sales of products used in the early stages of projects fell significantly, with the private sector showing no signs of being able to take up the slack. As a result, the CPA forecasts construction output to fall by 1.1% in 2011 and 3.6% in 2012 with no return to growth expected until 2014.

Key findings of the latest CPA survey include:

  • Product manufacturers’ confidence has dramatically decreased due to the marked change in trading conditions in Q3, with 44% of heavy side firms now expecting sales to reduce next year compared to just 14% three months ago. Fewer light side manufacturers now forecast growth in 2012.
  • Two-thirds of medium and large contractors reported that activity was either stable or lower than at the same time last year.
  • SME builders reported that workload declined for the fifteenth consecutive quarter, which is especially significant given that 70% of industry output is generated by firms employing less than 299 people.
  • Cash flow is now a real concern, with only 2% of specialist contractors having received payment within 30 days in Q3.

Noble Francis, CPA economics director, said:  “Although we recognise the need for government to reduce the economic deficit, it is critical that growth is kick-started through investment in areas of long-term benefit to the UK such as housing and infrastructure.”

He added: “This could be realised by bringing forward finance allocated for future years and doing more to create a framework whereby financial institutions are confident enough to invest.”

How do you think the construction industry will perform over the next few years? Get involved with the debate on Watts’ Twitter page @Watts_int or join the Watts Bulletin group on LinkedIn.

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The Watts Bulletin is the technical companion to the Watts Pocket Handbook, the essential guide to property and construction, as used by professionals since 1983.

Watts Bulletin editor: Trevor Rushton.

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