Construction decline easing off

Wednesday, 27 May 2009 11:41 AM

The fall in construction workloads is beginning to ease slightly, according to a market survey.

In key areas such as housing, the pressure on the rate of building decline has fallen, according to a Royal Institution of Chartered Surveyors (Rics) survey.

The news comes as the British Property Federation (BPF) has called on the government to use tax revenues to kick-start the beleaguered construction sector. The BPF has posed a manifesto to regenerate the sector, which includes a proposal to use Tax Increment Financing (TIFs), saying "the BPF is keen to work with government to see this new regeneration tool come to fruition".

Although workloads remained in negative territory for the fourth consecutive quarter, Rics surveyors reported slight improvements in private and public housing. In the first quarter of this year, 45 per cent more surveyors reported a fall rather than a rise in overall workloads, up from a net balance of minus 47 per cent.

However, Rics, the BPF and the Federation of Master Builders (FMB) have all warned the construction sector is still very fragile, with Rics saying, "the outlook for the next twelve months remains downbeat".

There are also fears within the construction industry that a possible future Conservative government could cut back on investment in social and public housing projects which are currently the backbone to the industry.

Chief economist at Rics, Simon Rubinsohn, said: "This slight easing we are seeing in both public and private housing is broadly in line with the figures coming from the government on the number of housing starts, which saw a small rise in the first quarter of 2009, and could be aligned to recent signs of a gentle pick-up in activity in the housing market.

"Activity is still declining across the construction sector, but it appears to be doing so at a lesser rate than was previously the case and public sector projects will play a key role in any recovery as long as the finance is made available to prevent them from stalling.

"Despite some sub-sectors showing slightly more positive signs, construction output is likely to post a double digit drop over the course of 2009 with a further loss of employment and skills in the industry."

The survey showed private commercial and industrial workloads recorded the worst figures, with a net balance down 57 and 61, with the infrastructure sector witnessing an accelerated pace of decline, the fastest in the survey's history, with 34 per cent more surveyors reporting a fall than a rise.

Brian Berry, director of external affairs at the FMB said: "The Rics construction market survey, in line with the FMB's own State of Trade Survey, shows that the decline in workloads is starting to slow which is good news but does not necessarily indicate the beginning of the end of the recession; the construction industry is still at or near the bottom of the recession.

"The industry needs the government to recognise the important role construction plays in the UK economy, by producing eight per cent of GDP, and act to help the industry recover as quickly as possible. The 'Get Britain Building' campaign has a ten point plan which includes stimulating the building industry through cutting VAT to five per cent, increasing social housing building and renovating existing homes to make them more energy efficient, that would help get Britain building again."

The BPF's regeneration manifesto, out today, calls on public bodies to maximise the benefits of their committed investment by, "looking at a variety of ways to fund vital regeneration schemes that could provide employment and housing right across the country". The five point manifesto includes the encouragement of new funding streams, such as TIFs, which have been backed by eight city councils including Birmingham, Manchester and Liverpool.

The manifesto also outlines that "rather than seeking a bailout, property developers want to work more closely with the public sector ensuring that more is made of opportunities to enable stalled development schemes to happen".

John Francis, partner at DPP consultants in Manchester, said: "In the future, successful regeneration will be as much about formal packages of financing arrangements as much as it will be about planning processes.

"Historically, we've been too focused on the physical side. This manifesto is the first time a clear brief for the financial/funding sides of things to be tackled has been covered."

Sarah Garrod

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