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Gloomy industry pins all hope on infrastructure plan

14 Dec 11 A new survey has revealed the extent of gloom across Britain’s building bosses, and the extent to which they consider the future of the industry now depends on the government’s infrastructure plans.

The survey, by hire company Speedy Services in conjunction with the CBI, found that nearly nine out of ten UK construction firms expect public spending cuts to act as a drag on operating conditions.

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 the availability of finance deteriorate over the past 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.

The survey therefore pre-dates the chancellor’s autumn statement, which contained details of the Funded Construction Pipeline and infrastructure spending, providing some hope to the industry, according to the CBI.

Of the 635 construction leaders who took part in the survey, 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 12 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, 86% of firms expect public spending cuts to have a significant or very significant impact on their business.

Given these tough operating conditions, 24% of firms expect business to decline in 2012. While 42% expect growth, the vast majority of these (38%) expect it to be weak.

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.

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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.”

Some 83% of firms plan to maintain their spending level on training or even increase it in the coming year, and a similar proportion (77%) intend to maintain or expand their investment in apprentices in the same period.

More than half (56%) of respondents say they have difficulty in finding staff with appropriate skills.

Speedy Hire CEO Steve Corcoran said: “Construction has an economic multiplier effect, with every £1 invested adding nearly £3 to GDP. Construction investment has the potential for job-creation in every region of the UK, and it has never been more vital than now.

“Recent government announcements on infrastructure investment and planning reforms are heartening. This spending should provide much-needed momentum for the sector, enabling firms to offer avenues into work for the unemployed, especially the young. Two-thirds of construction employers who responded to our survey would recommend a career in the sector.

Mr Corcoran said that the survey also highlighted the construction sector’s commitment to sustainability, with 86% of firms reporting that sustainability is an important consideration for their clients. More than two-thirds (69%) measure their sustainability in terms of water, waste, carbon contribution and energy use. Over half of respondents (53%) consider the carbon footprint of their suppliers as part of their selection process.                  

The construction sector sees the Green Deal as a means of reducing carbon emissions, with a balance of +32% believing it’s an effective way of reducing carbon emissions from homes, and the same balance of +32% believing it will efficiently reduce carbon emissions from businesses.

The regeneration game - CBI/Speedy Services construction survey 2011/12 can be downloaded here.

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