Construction industry treading water
Nearly nine out of 10 construction firms (88%) admit they are faring no better than they were 12 months ago.
According to Bibby Financial Services’ Business Factors Index, more than a third of construction businesses (37%) feel they are only just surviving, with many being forced into rationalising their businesses and making staff cuts.
The Index – which tracks the turnover levels among nearly 4,000 of Bibby Financial Services’ UK client-base alongside the outlook of 450 business owners across the UK – revealed just four out of 10 construction firms (41%) are optimistic about the future, with more than half (53%) believing the downturn could continue to affect the sector for at least the next three years.
Just 2% of construction businesses said they were in good shape and had actually benefited from the economic downturn.
The figures corroborate findings from the CBI, whose latest economic forecast reveal the economy expanded only slowly in the second quarter of this year and warned that the UK is likely to experience slow growth in 2011-2012.
When it comes to finding a way out of the financial doldrums, just under half (45%) of construction businesses feel the Government could be doing more to stimulate an economic recovery in the future. This included a fifth (20%) calling on the Government to increase public spending and more than one in 10 (11%) supporting an increased focus on policies to reduce the national debt.
Meanwhile, 16% called for the Bank of England to manage interest rates more effectively. Five per cent of construction firms felt the rates, which have stood at 0.5% since March 2009, should be raised.
One in three construction firms also expressed frustration at the complexity and bureaucracy of borrowing money from banks, with a third (33%) calling for a loosening of lending criteria and an increase in the availability of credit.
Jason Heath, construction finance specialist at Bibby Financial Services, said: “It has been well documented that the construction industry has been hit hard by the downturn, with firms having to work extremely hard to ensure they remain competitive.
“The Government’s austerity package, together with a hike in the rate of tax, rising inflation and ever-growing fuel prices means construction firms face an ongoing battle. The knock-on effect of these measures is that they struggle to access a healthy supply of cash, which only serves to confirm the outlook for many remains challenging.
“We have seen a substantial increase in firms turning to our specialist construction finance product as traditional lending has become tougher and not as flexible. It is therefore more important than ever that firms operating in the construction sector have access to the necessary funds to maintain a healthy cash flow and embrace new opportunities as and when they arise.”
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