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Construction sector faces 'very difficult year'

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Construction sector faces 'very difficult year'

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Published by Max Salsbury for 24dash.com in Housing and also in Development

Housebuilding Housebuilding

The construction sector suffered a poor final quarter to 2012 - and faces a very difficult year ahead.

The latest Construction Trade Survey, published today, shows that declining output and orders on the demand side, combined with rising costs on the supply side ensured that 2012 ended badly for the sector.

And though large firms, especially those working in infrastructure, have reported improving conditions, the bulk of the sector is facing a very difficult year ahead.

Noble Francis, Economics Director at the Construction Products Association, said: "It was good to see a rise in construction output for Q4 compared to Q3, when activity was adversely affected due to the Olympics and Paralympics.

"However, output remains 9.3% lower than a year ago and this is reflected in the Construction Trade Survey. A minority of firms working on energy and rail projects continue to thrive as do construction product manufacturers who are able to export outside the EU. Yet, overall, the industry continues to suffer falls in work across both public and private sectors. Furthermore, outside of infrastructure, the industry is expecting that 2013 will be even more difficult, with declining orders and enquiries across the industry."

The survey's key findings include:

• Private industrial and non-housing R&M were the worst hit sectors for building contractors, with 34% and 30% respectively, reporting falls in output
• 23% of building contractors reported that, on balance, output fell in the private commercial sector, whilst in private new housing output flatlined
• 13% of heavy side product manufacturers reported that, on balance, sales fell in Q4, whilst 46% of light side manufacturers stated that sales increased
• 62% of contractors reported that, on balance, orders fell in the fourth quarter
• Civil engineering workloads were flat during Q4, an improvement from a negative balance of -17% in Q3
• 43% of large and medium sized building contractors, on balance, suggested that tender prices reduced in 2012 Q4
• 30% of building contractors, on balance, reported rises in costs, marginally lower than the 32% in Q3
• 46% of contractors, on balance, reported falls in profit margins, down from 49% in Q3

Julia Evans, Chief Executive of the National Federation of Builders, said: "The construction industry is braced for a year in which weak demand and higher costs will create a very challenging trading environment. As the government and industry collaborate to lay out a long-term strategy for the industry, we must not lose sight of the need to maintain the current capital investment plans that will generate economic growth in the more immediate future."

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