Private sector not picking up the slack – RICS
The RICS survey of the UK construction market for the fourth quarter of 2010 shows that the private sector is not at present filling the gap left by cuts in public-sector construction activity. The survey shows that activity overall continued to decline across the country during Q4 2010, but that differences persist between the regions – there were sharper drops in Northern Ireland and Scotland, but workloads in London and the South East actually rose moderately.
The headline figure for construction workloads improved slightly from –10 to –5; in other words, there are still more surveyors reporting declines than improvements in activity. The lack of government funding and difficulties in obtaining finance were cited as key issues affecting the sector.
“There are some glimmers of hope offered by the private commercial sector, but crucially, there is still no evidence as yet of a broad-based recovery in private-sector workloads,” RICS noted. The net balance for the private commercial sector rose from –5 to +9 but RICS notes that a single quarter of “mildly positive” data is more likely to indicate a bottoming-out of the sector than a recovery.
Among the comments by surveyors quoted by RICS in its report, David Corry at Turner & Townsend in London says that commercial development, particularly in the City and Midtown areas of London, is showing signs of increases. Peter Bushnell at Peter Bushnell Associates (nationwide) notes increased signs of confidence, with private investment money being at the forefront of new developments. Meanwhile, David Lake in Cornwall feels the private sector remains “surprisingly buoyant”, but adds that the big unknown factor is whether this would survive an increase in interest rates.
Anthony Dillon at Willmott Dixon Construction in Manchester says it is not yet possible to see the gap in public-sector development being filled with an increase in private-sector work. Gordon Clark at Johnstons in Carlisle cites a general lack of confidence among clients as a result of current economic conditions and the spending cuts, which has led to a reluctance to commit to starting projects. Phil Hodges in Redditch says the lack of bank finance is the biggest factor in restricting activity. And Peter Vinden at the Vinden Partnership in Manchester says the “recovery” is extremely slow and adds that “2011 will be a difficult year for all firms working on or involved in construction”.
