At the end of whose recession?

While headlines talk of mergers, better figures from manufacturing and forecast the end of the recession, the consequences of the downturn are still working their way through the construction sector.

The economic cycle has yet to turn for most contractors and the ’pump priming’ and public sector spending has not assisted many companies. In the construction sector, firms are adapting to a reality of reduced order books and on-going projects reaching completion. As a result, many businesses have been forced to close. Those that remain have, in many cases, reduced staff. As a result training and apprenticeships are suffering. Firms are cutting back their tendering ambitions as overheads are cut to the minimum and in the wider marketplace, competitive conditions have led to very low bids and a lowest cost mentality.

In the current climate, managing cash is critical. Companies with apparently healthy order books have fallen victim to the combination of a bad contract and tight bank lending leading to insolvency. There is a real need to address the issue of cash flow within the sector, with calls from industry stakeholders including RICS for soft loans to construction firms.

Framework contractors and those who are able to compete for public sector projects are faring better. Those contractors who have existing framework contracts have protected margins but new frameworks are increasingly competitive. There is some indication of improvement in the housing sector, but coming from such a low base it can hardly be classed as recovery.

The worst hit sectors now are private commercial and industrial. In the face of this, many contractors are looking to adapt to compete for public sector work and regional contractors and SMEs have been particularly affected. Both the Construction Industry Council at a national level and regional task forces agree that more needs to be done to protect the construction industry and to secure businesses and skills, vital for Britain’s future economy.

A clear lead on the urgent demand to reduce the carbon emissions of existing building stock would do much to encourage the industry at the local level. If the popular 10:10 initiative to reduce carbon emissions by 10 percent by 2010 is embraced by voters as well as political parties, it may provide the motivation for government policy to more urgently address the issue of targeting climate change.

One key way identified for reducing emissions is in the existing building stock, using low tech solutions including better insulation, double glazing and exploring options like solar panels, heat source pumps, along with more hi tech solutions like smart meters. A cash injection into this area from the government, combined with investment in training, would stimulate activity in the sector and make the 10:10 challenge far more achievable.

Localisation of the source of materials and supply of labour is another big issue for the public sector, mired as it is in the complexities of EU procurement rules designed to permit open competition. More needs to be done to open public sector contracts to the local market and SMEs and to provide access to both education and infrastructure projects.

Finally, to ensure the industry retains a skilled workforce for the future, the looming skills gap caused by an aging workforce and current poor recruitment should be addressed, through promote and support of apprenticeships and sector specific training.

Set against these requirements, talk of the end of recession is premature and the response from the government seems inadequate. It will require a response more radical both in scope and vision to help an industry move beyond recession to meet the enormous challenges facing our built environment for generations to come.