UK Construction: Out of the recession, but what now?

Will construction firms profit in 2010?

The UK may have just about crawled its way out of the recession, but growth is still slow in many sectors namely the construction industry.

A recent survey by the Construction Skills Network (CSN) says that the industry is set to see a slow return to growth over the next few years after the recession's 'severe' contraction in building projects. Late last year, a survey from KPMG indicated that two thirds of global industry professionals believed that 2010 would see their profits increase or stay the same by the middle of the year, despite output falling by 13 percent.

So is this reckless optimism or does the construction industry have some tricks up their sleeves?

Rough times ahead

At the time of the survey, Fiona McDermott, KPMG's UK head of building and construction, warned that despite profit levels possibly staying at the same level, some companies could face rough times later in the year.

"Many companies are living off the profits of contracts secured before the recession, and whether such performance can be maintained is dependent on a number of factors, not least a general economic recovery," she said speaking to Building.co.uk.

"Although the sector appears to be in fairly good shape at the moment, we have to ask ourselves: will 2010 be the year that industry feels the pain already experienced by other sectors of the economy?"

Analysts today seem to think so, with the CSN predicting industry job losses of up to 375,000 by 2011. What's worse is that by 2014, only 100,000 of those jobs will be filled, leaving over a quarter of a million people unemployed.

So is there a silver lining or will building firms only see their profits increase because they're tightening their belts and laying off staff?

The report would seem to indicate that construction would be strongest in Eastern England, no doubt due to the Olympic Games projects, as well as the East Midlands. Wales and Scotland would also see strong growth.

However, the general consensus would seem to be that the situation is a fragile one and that with the scale of debt, and the possibility of future funding cuts, the construction industry could be in for a rough ride for 2010.

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