The latest Construction Trade Survey published today, shows that a combination of falling demand and rising costs hit the construction industry hard during Q3 and this is only adding to the sense of pessimism over the future.

Commenting on the survey, Noble Francis, Economics Director at the Construction Products Association said:

‘Construction output weakened in Q3 and order levels were depressed across the board which is bad news for the industry. On the products side, sales of the products that are typically used in the early stages of the construction process fell significantly largely due to the sizeable cuts in public sector capital investment, which are now beginning to feed through.

Furthermore, the private sector shows no signs of being able to take up the slack with contractors’ new orders for private sector work being equally depressed. All of these factors are reflected in the Association’s latest forecasts, which expect construction output to fall by 1.1% in 2011 and 3.6% in 2012, with no return to growth until 2014.”

Speaking about the survey Stephen Ratcliffe, Director of the UK Contractors Group, which represents more than 30 of the UK's leading contractors, said:

‘Providing certainty over the pipeline of forward public sector programmes and working with the industry to get shovel ready projects underway, would be the most helpful thing government could do in the wake of these results. That is certainly a message that has been picked up by the Prime Minister and the Chancellor and UKCG hopes there will be more positive news for the industry in the wake of the Autumn statement.’

Key survey findings include:

• Product manufacturers’ confidence regarding the future has dramatically decreased due to the marked change in trading conditions in Q3 with 44% of heavy side firms now expecting sales to reduce next year compared to just 14% three months earlier. Also fewer light side manufacturers now foresee growth in 2012
• Two-thirds of medium and large contractors reported that activity was either stable or lower than at the same time last year.
• SME builders reported that workload declined for the 15^th consecutive quarter which is especially significant given that 70% of industry output is generated by firms employing less than 299 people.
• Cash flow is now a real concern with only 2% of specialist contractors having received payment within 30 days in Q3.

The construction products sector has an annual turnover of £50 billion and accounts for 40% of total construction output.