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Piling contractors feeling squeeze from aggressive house builders

Piling contractors could start moving out of the housing sector because of house builders' 'aggressive' moves to squeeze contractors in a bid to keep up their margins in the faltering housing market, Aarsleff managing director Terry Bolsher has warned.

Bolsher told GE that the firm had substantially dropped the amount of housing work it was doing and was moving increasingly into the power infrastructure sector.

"The house builders are slowing down and being more aggressive on pricing, which is very difficult given the fact that the cost of steel has risen 50% in the last year to about 700/t (£537) and cement and aggregate costs have gone up 8%. Housing has dropped from about 60% to 40% of our business and I can see it dropping further.

"But we are moving into other sectors such as power infrastructure, which is extremely buoyant and will require significant foundation engineering," said Bolsher. He added that turnover was already 10% above forecast for the past six months and the firm was spending £5M extending its factory in Newark, Nottinghamshire. "We are not going to look for house builders that are driving their costs down."

Bolsher's comments came amid gloomy predictions for house building. New figures from the National House-Building Council (NHBC) show that despite a 1% increase in new housing completions in the UK in 2007 (compared with 2006) to 186,505, NHBC predicts a "downward trend" in house building for 2008.

"Key housing market indicators, such as ability to buy, reservations and mortgage approvals, show a downward trend," NHBC chief executive Imtiaz Farookhi warned. "In addition, house builders face other challenges, including meeting government targets to build zero carbon homes and increasing housing supply, alongside uncertainty in the UK housing market amid fears of a recession in the US."

However, Roger Bullivant director John Patch said Bullivant's own studies into the housing market for the coming year left it optimistic. "It is something we are aware of and are monitoring on a day-to-day basis, but at the moment we are only talking about a very small difference [in housing starts].

"Year on year, the government is aiming to increase the amount of houses being built and that has to happen at some stage. So we believe the effect of the downturn on our business will be negligible."

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