Trade body reports finding 'collapse' in building industry confidence

The Federation of Master Builders (FMB) said that only 14% of respondents to its 'state of trade' survey for the fourth quarter (Q4) of last year expected to see an upturn in the volume of work. Approximately 400 building companies and contractors responded to the FMB survey with typical responses coming from firms employing about nine people and turning over between £100,000 and £249,999 each year.

"Workloads are expected to continue to decline at the beginning of 2012, with negative net balances across all sectors," the FMB's report (11-page / 295KB PDF) said.

"The net balance for overall expected workloads deteriorated by 18 percentage points to -30, reflecting positive sentiment from just 14% of respondents. This compared with 24% of firms having a positive outlook in Q3 [in 2011]. Those anticipating that workloads would decline also rose, from 35% in Q3 to 44% in Q4. However, around 42% of firms expect no change in workloads in the first three months of 2012".

In the last three months of 2011 more firms reported a decline in the number of enquiries they have received about new work, the report said.

"The net balance for enquiries also deteriorated in the final quarter of 2011, posting -30, from -24 in Q3. Although the proportion of respondents indicating that enquiries had risen during the quarter remained unchanged at 20%, those reporting lower levels of enquiries increased from 44% in Q3 to 50% in Q4," it said.

Building firms across the country in all sectors – residential; non-residential; repair, maintenance and improvements; general building firms and specialists included – are all generally expecting less work in the first three months of the year, the report said.

Only 5% of builders in the private residential repair, maintenance and improvements (RM&I) sector expect their workload to increase. The FMB said that the economic climate was impacting on the level of work.

"The increasingly uncertain outlook for the economy and more downbeat prospects for employment may lead to a retrenchment in consumer spending, particularly on discretionary items, such as non-essential RM&I work," it said.

In the final three months of last year companies that work on non-residential buildings, such as public projects and commercial offices reported also generally reported declining workloads. Only 6% of firms working in the new public build sector said they had experienced increased workloads in the period, whilst 51% of firms in the industrial build sector reported a decline in their workloads for those months.

Overall, respondents also reported a decline in the number of people being employed, the report said.

In a statement the FMB said that the construction sector for small-medium-sized enterprises had been in recession for four years and that confidence within the industry had "collapsed".

"The FMB’s state of trade survey ... reveals that workloads in the SME construction sector have declined in each of the 16 quarters to the end of December 2011, and that confidence in the repair, maintenance and improvement (RM&I) market is set to plunge," it said.

Brian Berry, director of external affairs at the FMB, described the results of the survey as "disastrous" for businesses in the "RM&I market" and that industry conditions as a whole were at their worst since the beginning of 2009.

Berry said that Government plans to persuade homeowners to improve the energy efficiency of their properties could help building industry workloads, but that homeowners would need improved incentives to take advantage of the scheme.

Last year the Energy Act received Royal Assent and means that a Government-backed 'Green Deal' will come into effect this autumn. The Green Deal is designed to increase the uptake of energy efficiency measures in properties by allowing property owners to defer the up front costs of such works. The scheme is part of Government plans to reduce emissions from buildings. Repayments will be at a level no higher than the energy savings made through the installation of energy saving measures, according to the Government. Under the scheme an independent assessment is made of the property's needs, and the property owner can then choose any supplier accredited under the Green Deal scheme to carry out the work.

"Although the Green Deal has no upfront financial costs the Government needs to accept that it is still perceived by householders as a debt and there is no appetite for more borrowing amongst householders already worried about meeting existing commitments," Berry said.

"If the Government’s Green Deal initiatives is to succeed in its ambition to retrofit 14 million properties by 2020 then it will need to provide householders with additional financial incentives such as a reduced rate of VAT or lower Stamp Duty," he said.