Building sector set to turn the corner this year

The Royal Institution of Chartered Surveyors’ (RICS) construction market survey said Yorkshire’s construction market is “expected to turn a corner this year”, with chartered surveyors predicting an increase in output.

Twenty five per cent more surveyors quizzed in the final three months of 2012 said they expect workloads to increase over the coming 12 months after a tough year for the building sector.

Reported workloads also grew slightly in the fourth quarter, the survey showed. A net balance of ten per cent more respondents said activity had increased, with the biggest gains seen in private housing and private commercial development.

However, 91 per cent of surveyors said financial constraints are holding the sector back ,with about two thirds citing insufficient demand. Seventy per cent also claimed weather hampered a recovery in the sector.

RICS Yorkshire and Humber construction spokesman, Ian Tomlinson of Rex Procter & Partners, said there remains a dearth of big schemes in the region.

“The local construction industry has been boosted by Trinity Leeds shopping centre but it is not clear what will replace it,” he said.

“Progress at Westfield in Bradford would be a boost, but in isolation this is not enough.

“We need increased spending across both public and private sectors. New government plans for education and housing spending only scratch the surface of what is needed.”

Last month’s agents’ report from the Bank of England showed construction output declined through 2012 and remained at low levels.

Agents said some regions were starting to see a stabilisation in the rate of decline, reflecting a “modest improvement” in private sector activity in some areas, but this was partially offset by the continued fall in public sector demand.

“Weak confidence levels and access to credit were, however, constraining new-build commercial activity outside London,” said the report.

“Repair and maintenance workloads continued to be buoyed by refurbishment of retail and public sector buildings. House building activity had improved slightly, but substantive growth was limited to London.”

Jeff Fairburn, managing director of York-based housebuilder Persimmon, said there are “encouraging signs” in the housing market, aided by the Bank of England’s Funding for Lending Scheme, which offers banks and building societies discounted credit in return for boosting lending. “The Bank of England credit conditions survey indicated that lenders are planning on putting more money into the market,” he said.

“Funding For Lending is showing some signs of improvement. There are early indications of various mortgage rates improving, but on the other hand, the criteria for assessing people for mortgages is tightening a little.

“We expect to see some modest growth. We do not see any great increase in volume.”

Simon Rubinsohn, RICS chief economist, said: “After a truly dreadful year, if one believes the official data, there are signs that 2013 will bring some better news for the construction sector.

“Most notably, the numerous measures the government has introduced with a focus on infrastructure appear to be bearing some fruit. Critically, competitive pressures in the sector remain intense which is continuing to erode profit margins.

“And for the time being financing constraints are still an issue although the Funding for Lending Scheme should gradually help to ease this challenge.”

London and the South East and the North of England saw overall workloads rise by the biggest margin, while Northern Ireland and Scotland saw activity continue to drop by significant margins.