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Decline slows, but no upturn in 2009

Signs emerged this week that the worst of the recession may have passed for civils contractors. But contractors warned that there would be no recovery before the end of this year.

A survey by the Civil Engineering Contractors Association (CECA) revealed that for the first quarter of 2009, contractors’ total civil engineering order books were declining, but at a slower rate.

Since the downward trend started in July 2008, CECA’s workload trends survey of 122 contractors in England, Scotland and Wales has recorded progressively weaker results for each successive quarter.

In July last year 16% said orders were down. This increased to 25% in October and 46% in the final quarter of 2008.

However, the latest survey published last week shows that the proportion of firms reporting a fall in orders had increased to 42% in the first quarter of 2009.

“We have yet to see a significantly positive impact on workload from the government’s fiscal stimulus package put forward in November 2008.”

Rosemary Beales, Civil Engineering Contractors Association director

“While we hope the slowdown in the fall continues, it is too early to speculate on a recovery in 2009,” said CECA director Rosemary Beales.

“Workload across the sector has been hit very hard in the last year and we have yet to see a significantly positive impact on workload from the government’s fiscal stimulus package put forward in November 2008.”

All types of workload, with the exception of rail, are in decline and the worst results are in the preliminary works and water & sewage sectors.

Optimism in the face of grim outlook

Despite this grim outlook, speculation that the recession may be easing in civils was further fuelled by the news that civil engineering project starts have picked up since the beginning of the year even though new construction project starts in April were 30% down on a year ago.

Research by construction market intelligence firm Glenigan shows that the recent upturn in the underlying value of civil engineering project starts since the start of the year continued during April. A dip in transport project starts in April was offset by the continued strength of the energy sector and a rise in the value of waste transfer projects, it said.

“While we hope the slowdown in the fall continues, it is too early to speculate on a recovery in 2009.”

Rosemary Beales, Civil Engineering Contractors Association director

Last November’s Pre-Budget report brought forward £3bn of capital investment from 2010 to 2011. But the declines in public sector starts indicate that government departments have been slow to make use of the extra cash.

This is reflected in a £700M capital underspend in health, education, transport and social housing over the last year.

While the volume of detailed planning approvals for public sector projects has been weak, Glenigan said increasing numbers of projects going out to tender indicate a more positive second half of 2009.

However, signs that the recession may be slowing have done little to ease fears that it is having a negative impact on the construction industry.

Constructing Excellence chief executive Don Ward last week warned that the industry risked returning to lowest price tendering.

CECA’s view

Rosemary Beales, CECA director

Rosemary Beales, CECA director

● “All but one of the workload categories are negative, with all showing a sharp drop on the previous quarter”

● “Workload has been hit very hard in the last year and we have yet to see a significantly positive impact from the government’s stimulus package in November 2008”

● “The government should set out what they intend to invest clearly for all to see”

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