UK building industry may shrink 25 percent

Bloomberg

Output from the industry will fall to about 90 billion pounds ($123.9 billion) this year from a high of 122 billion pounds two years ago, Snook said today in a telephone interview.

The current slowdown may match the experience of the 1989- 1993 U.K. construction slump, when 350,000 jobs were lost in the industry and many smaller contractors failed, Snook predicted in November. Building work shrank at the fastest pace in at least 12 years in February as the credit famine hampered projects.

Rok cut 700 jobs and closed its property development arm last year as earnings fell 71 percent.

"I don’t think the impact has really been felt yet," Snook said. "If you look across the big cities across the U.K., some of those big office blocks will take two years to build. It won’t be until those projects come to an end that the real impact will be seen across the economy."

Rok, based in Exeter, England, has won 250 million pounds of more profitable and longer-term "framework" contracts for repair and maintenance work from affordable housing, education and government clients this year as it moves away from building. The company gets 70 percent of its sales from government-related or so-called regulated-utility clients such as electricity or water companies, which are less affected by the economy.

Since November, demand for new building work, particularly from industrial and commercial clients, "has not only just fallen off the edge of a cliff, it’s not recovering at all," Snook said. "There’s very little of that work around and what there is, it’s highly competitive."

Demand from local authorities for new social housing and schools has "stabilized, but is yet to start growing again," the CEO said. "It’s settled at a lower level and some of the work postponed in November has now been restarted. We don’t expect that to get stronger until the autumn."