The latest ONS construction figures may provide false comfort. While the statistics currently indicate that fragile stability is being maintained, I fear a return to year-on-year sector decreases come the early summer.
That said, there are some noticeable bright spots, with infrastructure, new build housing and non-housing repair and maintenance figures each maintaining recent increases of around 5%. However, these increases only compensate for the falls in public sector projects of around 15%.
The share of the market enjoyed by the major national contractors has fallen to 40%, a drop of nearly 10% since early 2010 as project sizes decrease, leading to greater competition. Life for these contractors will become even tougher as major public sector long term contracts won in 2009/10 come to a conclusion.
There has also been a sharp fall in the maintenance of public housing, having dropped by as much as 20% since 2010. This in turn is leading to higher than hoped for unoccupied rates which are negatively impacting on the improvements in the new build housing market, buoyed by recent Government assistance.
The future though could well be dependant on the pace of infrastructure investment from the private sector.
Overall my views are broadly similar to the recent construction industry forecast put out by Experian, in that while the outlook is bad, it’s not as bad as first thought. The future though could well be dependant on the pace of infrastructure investment from the private sector which, while it is forecast by the government, in reality is far from certain.