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Construction to shrink further during remainder of 2010

10 Aug 10 The construction industry is facing a further decline in output in the second half of 2010, according to the the latest Construction Trade Survey.

The construction industry is facing a further decline in output in the second half of 2010, according to the the latest Construction Trade Survey, despite last month's positive GDP statistics.

The report, produced by the Construction Products Association, showed that building and civil engineering contractors experienced falls in output in both the first and second quarter of 2010. All sectors of the industry are reporting poor sales, order books and enquiries.

Building contractors’ workloads fell again during the second quarter of 2010 and output has now been falling for nine quarters, with 20% stating that workloads fell compared to a year ago.

More than half of contractors (56%) reported a fall in margins during the second quarter of 2010, though a similar number (53%) also said that tender prices fell.

Some 61% of heavyside product manufacturers expect no change or a fall in sales in the second half of the year, demonstrating the uncertainty surrounding the recovery in the housing market and the speed and extent to which public sector cuts will impact upon construction.

Almost half of manufacturers reported rising costs of raw materials and fuel energy during the quarter.

The industrial sector suffered the sharpest fall in workloads during 2009, with a 34% fall in just one year and this latest survey highlights that the situation in the industrial sector continues to deteriorate.

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After falling 27% in 2009, workloads continued to fall in the commercial sector with nearly 30% of building contractors reporting that workloads on commercial projects had fallen, despite work going ahead on a few major high profile projects in prime areas of Central London.

Half of contractors stated that workloads fell on education and health in 2010 Q2.

Noble Francis, economics director at the Construction Products Association said: “Over the next few years, construction is braced for a fall in public sector investment and will increasingly need to look to the private sector for growth. It is critical that capital investment is focused on those areas such transport, energy, and other key infrastructure projects, that will do most to stimulate the wider economic recovery.”

Stephen Ratcliffe, director of the UK Contractors Group, said: “Whilst there are signs of some activity in the private sector, the survey highlights very real worries about public sector investment. The recent postponement of the Building Schools for the Future programme has added to the lack of confidence about public sector work.

“There is a clear message for government here as it undertakes its comprehensive spending review. We will be pressing politicians very hard over the summer to ensure that there is clarity about the future programme when the CSR is announced.”

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