Construction firms facing tough operating environment

Published on Wednesday, 14 December 2011 10:57
Posted by Scott Buckler

Nearly nine out of ten UK construction firms expect public spending cuts to act as a drag on operating conditions, the CBI said today

Responding to the first CBI/Speedy Services national construction survey, close to two-thirds of firms described the UK’s planning system as an obstacle to business, while four out of ten have seen a deterioration in the availability of finance over the past year.

However, the Chancellor’s autumn statement contained encouraging news for the sector, including details of the Funded Construction Pipeline and infrastructure spending. The survey portrays a sector well-placed to boost skills and create jobs, with more than three-quarters of firms planning to maintain or increase spending levels on training and investment in apprentices in the coming year.

The survey was conducted online between 30th September and 21st October 2011, with responses from CEOs, managing directors, and senior managers from firms across the UK, employing close to a million people in all areas of construction, ranging from design and materials supply to civil engineering and house building.

Firms face tough operating environment

Of the 635 construction leaders who took part, 40% responded that the availability of finance had deteriorated in the past 12 months, 52% reported no change, and only 8% said they had seen an improvement, resulting in a negative balance of -32%.

Firms expect credit conditions to deteriorate further in the next twelve months, with a negative balance of -20%.

Small and medium-sized businesses have been particularly affected by a lack of finance, with nearly half (45%) reporting a deterioration in availability in the past 12 months, and more than a third (37%) expecting a further deterioration in the coming year.

Over the next five years, a large majority (86%) of firms expect public spending cuts to have a significant or very significant impact on their business.

Given these tough operating conditions, a quarter (24%) of firms expect business to decline in 2012. While two-fifths (42%) expect growth, the vast majority of these (38%) anticipate growth will be weak.

Barriers to growth and investment

The UK’s planning system is seen by nearly two-thirds (61%) of survey respondents as a barrier to their operations.

When asked about the most significant barriers to house building in particular in the past year, half (50%) of respondents identified mortgage availability, followed by consumer confidence (17%), business finance (14%), and planning (10%).

Firms expect this pattern to be little-changed in three years’ time, with 36% of firms anticipating mortgage availability will remain the top concern, 21% citing consumer confidence, and an equal 14% remaining concerned about both business finance, and the planning system.

Asked what would be the most effective boost for the construction sector, a third (33%) of respondents cited infrastructure spending.

Dr Neil Bentley, CBI Deputy Director-General, said:

“Construction firms are facing tough operating conditions, and they are clear about what can be done to give the sector a boost. Firms want certainty, and they need guaranteed infrastructure spending to deliver it.

“Now the sector has grounds for optimism. The Chancellor’s autumn statement outlined the Construction Pipeline and increased the Government’s commitment to housing, and spending on roads, rail, energy and other crucial infrastructure.

“The Government has recognised the role construction can play in building a path to the recovery, and the sector is more than ready to play its part in generating economic growth.

“But the Government must now move quickly to bring infrastructure projects to market so the sector can gear up and create jobs.”

 

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