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Economic downturn to claim 13,000 contracting jobs

Bleak economic results and predictions have once again pointed to a severe downturn in the contracting sector, the most pessimistic claiming 13,000 contracting jobs and 165 companies are at risk in the coming year.

Plimsoll Analysis quizzed 1500 civil engineering contractors, and concluded that 12,996 staff could be lost.

House builders are already shedding staff, and piling contractors are the first civil engineering sector to be hit hard.

Piling contractor Roger Bullivant confirmed it had put proposals to cut jobs to its staff, but the results of this consultation were unavailable as NCE went to press.

A second contractor, Piling Solutions, has entered administration (see news last week).

Senior Plimsoll analyst David Pattison said further redundancies would be inevitable as struggling companies try to get a grip on costs.

"The 165 companies we have identified as in danger need to act now if they are to survive. It is very important they review their entire business cost base and take action now to significantly reduce their outgoings.

Whilst job losses are undoubtedly bad news for any company, such decisive action may be called for to guarantee the ultimate survival of the business- even if this means the business is 30 or 50% smaller than it was."

Further evidence of the downturn came this week from Leeds, where Carillion halted work at the 'Leeds Shards' building, promoted by KW Linfoot.

A British Property Foundation spokesman said: "Once the building is finished, all of the office and retail space will incur rates while it's empty.

There's no point going ahead with a building where the residential parts can't be sold because of the state of the property market, and if you don’t sell the commercial aspects off quickly you will be liable for rates. That's not a recipe for good business."

"It is something that will increasingly happen, not just in Leeds but across the country," he added.

Construction equipment manufacturer JCB has already announced it is shedding 500 jobs, due to a 20% reduction in its production forecast for this year.

JCB's group chief executive Matthew Taylor said: "We do not expect to see a recovery until late 2009 at the earliest."

Stalling demand for plant is the clearest indicator yet of the slowing market. Those operating plant will find it costlier to run.

The Civil Engineering Contractors' Association (CECA) this week announced that increased fuel costs required increases to day rates for plant hire, from 7.5% for petrol and diesel plant, to 25% for LPG and a staggering 40% for plant using paraffin fuel.

"This is a substantial increase and contractors need to be aware of the amendments to the rates for plant, which reflect the costs that they have to absorb," said CECA technical officer John Wilson.

The downturn will have unexpected benefits for cash-rich contractors with better margins.

Balfour Beatty raised a £186 war-chest for acquisitions in May. The shrinking market could hand Balfour acquisitions at bargain prices.

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