Construction output 'fallen to lowest levels in seven months'

Published:  22 February, 2011

Bad weather and housing market decline has caused construction output to fall, according to Bibby Financial Services.

Severe weather conditions at the end of 2010, as well as a decline in the housing market and government spending cuts, have all played their part in seeing the industry’s Business Factors Index fall to 99.1 – the lowest since May 2010.

This makes the construction sector the second-worst-performing industry in the UK during the final quarter of 2010, and reflects figures released separately by Markit/CIPS, which showed construction output reducing in December for the first time in nine months.

According to the company, 39% of construction firms now feel negative about how their business is doing.

As a result of the fragile nature of the industry, construction firms said they are focusing on taking steps to prepare themselves for further economic challenges ahead, with three quarters (75%) claiming they are cutting costs – the highest of any sector.

Only 11% are preparing implementing a growth strategy, which is the lowest sector reading, indicating the industry is concentrating more on survival than growth. Some 15% said a government focus on increasing public spending to stimulate confidence would help aid economic recovery in the future.

However, despite conditions being tough, almost a third of construction firms are hopeful for the future, which is the second highest reading of all the sectors, suggesting a divide in optimism among businesses in the sector.

This is likely dependent on whether firms rely heavily on government contracts and therefore find conditions more challenging than others, due to public sector cuts.