Survey Indicates Confidence Returning To The UK Construction Sector

A recent survey shows confidence returning to the UK construction and property sectors, but lending access and lack of new orders are continuing concerns. Although housing starts are …

A recent survey shows confidence returning to the UK construction and property sectors, but lending access and lack of new orders are continuing concerns. Although housing starts are starting to rebound, levels are nearly half of the 2007 peak, threatening a shortage of quality housing. See the following article from Property Wire to learn more.

Construction and real estate businesses in the UK are more optimistic about the property sector than they were last year, a new report shows.

They expect an increase in turnover and profits but believe that growth will be constrained by a shortage of demand, according to the report from financial and business advisors Grant Thornton.

Some 13% are optimistic on the outlook of the UK’s economy over the next 12 months compared to -20% in 2009. Expectations of turnover/revenue and profits have also improved this year, with 37% anticipating an increase in profits compared to 32% in 2009. In addition 43% expect turnover/revenue to increase in 2010 compared to 34% last year.

Despite the optimism, a shortage of orders remains the greatest constraint for construction and real estate PHBs over the next 12 months, the same constraint topping the list a year ago.   Although a slight decrease from 2009, 51% cited this as the greatest constraint compared to 52% last year.

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However, apparent constraints over financing have not led to an appetite for growth through acquisition or a public listing. According to the report, 84% of construction and real estate businesses have no plans to grow through acquisition in the next three years.

Similarly, a high number,  68% do not anticipate a change in the ownership of their business in the next three years and more still, 81%, do not anticipate that their business will undergo a public listing over the same period.

‘Optimism in the sector has seen a slight increase from 2009 as construction and real estate PHBs show signs of recovering from the very difficult conditions seen last year. However, recovery in the sector will be very dependent on access to finance becoming more available and there is a lot of pressure on the banks to ensure this is the case,’ said Kathryn Hiddleston, head of construction at Grant Thornton.

‘Despite the optimism, the majority of construction and real estate PHBs  still cite a shortage of orders as the greatest constraint, which may worsen if any announcements in the up-coming Comprehensive Spending Review prove detrimental to the sector. What also might be worrying for the industry are signs of a decline in property prices which won’t be helped by a lowered economic growth forecast in the UK and inflation staying higher than previously forecast,’ she added.

The latest figures from the department for Communities and Local Government shows that there were 28,590 seasonally adjusted house building starts in England in the June quarter, up 13% from the first three months of the year and 84% above the trough in the March quarter 2009.

But they are still 42% below their March quarter 2007 peak and the Royal Institution of Chartered Surveyors said it believes these figures mask a more worrying trend. ‘Both the private and public sectors contributed to the better numbers, which in aggregate were 13% higher than in the first three months of the year. While on the face of it this appears encouraging, there are good reasons for questioning whether this more positive trend will be sustained for the rest of this year and into 2011,’ said Simon Rubinsohn, RICS chief economist.

‘The recently published RICS Construction Market Survey shows new inquiries to begin housing projects actually turned negative in the second quarter of this year. Meanwhile, the Home Builders Federation has highlighted a drop in site visits and an increased use of incentives in its latest report. With HCA funding being scaled back, a drop in house building from the social sector is inevitable,’ he explained.

‘Meanwhile, with the private sector now in the process of replenishing its inventory, the likelihood is that its output will soon begin to stabilize. Critically, we suspect that housing starts this year will amount to around 110,000 and the number for next year will be little higher. With demographics arguing for more than double this total on the most recent analysis, the prospect of a medium term shortfall of good quality homes is a very real concern,’ he added.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.


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