Building firms told to budget for tough year
The construction industry faces another tough year of trading after the Budget did nothing to restore confidence or increase the availability of credit at competitive rates, according to a leading figure in the industry.
Gary Turley, finance director at Shaylor Group, said the new coalition’s economic plan went nowhere near far enough in creating the right environment for businesses to thrive over the next 12 months and beyond.
“It was a very benign Budget for businesses generally and did not include enough positive proposals to help the construction industry recover from this recession,” he said.
According to figures from the Office for National Statistics (ONS), national construction output fell to an all time low in 2009 with a fall of 11 per cent over the last year – the largest fall the industry has experienced in a single year since 1974.
In the West Midlands the fall was 23 per cent from 2008 to 2009.
Latest forecasts from the Construction Products Association (CPA) for future growth are that output will fall by another three per cent in 2010, if this happens then they estimate that by the end of this year the industry could fall by as much as £18billion from its peak in mid-2008, a more rapid decline than the recession of the mid-1970s.
The region’s construction industry has also been dealt a further blow after the Coalition announced the scrapping of the previous Labour administration’s Building Schools for the Future programme.
Under the original BSF scheme, set up by Labour in 2004, all 3,500 secondary schools in England were to be rebuilt or refurbished by 2023 but Education Secretary Michael Gove announced that all proposed rebuilding schemes that had not entered the build phase would be scrapped, disappointing dozens of schools across the West Midlands with schools in Sandwell and Walsall particularly hard hit.
Mr Turley said the industry would remain tough with contractors offering cut price bids to win contracts with the intention of clawing back a profit from extra claims or withholding retention payments to sub contractors.
Mr Turley said: “This is exactly what happened in the ’70s and if it happens again we will see a more litigious industry in the future as well as more companies failing if they continue to operate in this way. The construction and property industry needs a relaxation in the recent tougher lending criteria so that confidence can return and we may have to wait until the spending review in October before this happens.
“In the meantime, the companies that can continue to innovate and provide dynamic solutions for their clients will be best placed to ride out the recession and survive.”
