The latest indications from the Federation Of Master Builders’ State of Trade Survey for the third quarter of 2008 (PDF, 219KB) show that construction industry conditions remain gloomy with little sign of any improvement in the short term. Housing market conditions continue to deteriorate and instability in financial markets is being felt throughout the industry. Higher materials costs are squeezing margins, placing additional pressure on firms facing dwindling demand. The survey shows that:
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Workload down: the overall workload balance remained in negative territory for a third consecutive quarter in Q3 2008, as 27% more firms reported lower workloads than higher.
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Housing market hardest hit: private housing continued to be hardest hit, although strong negative balances were recorded across the board. Private new work was by far the weakest sector, with 60% of respondents reporting lower workloads, but private repair, maintenance nad improvement work (RM&I) also deteriorated with 45% of firms reporting lower workloads.
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Varied performance across the regions: Greater London saw the strongest performance by some way, whilst the North West recorded the weakest, and performed well below the national average.
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Employment prospects remain downbeat: employment levels continued to fall during Q3 2008, reflecting weaker workloads. Expectations are for further declines in staffing levels in the coming months, with 41% of firms expecting to cut workforces.
Brian Berry, Director of External Affairs at the FMB said:
“With house building at its lowest level since 1945 the Government needs to act quickly to restore stability in the building industry. The situation is deteriorating at an alarming rate and the Government needs to take urgent action if the building industry is not to suffer any further. The tragedy of it all is that the is a serious undersupply of homes with over 150,00 on council house waiting lists. Action is needed not only to shore up the building industry but the thousands of families who need a home.”
Berry continued:
“The Government should be acting now on implementing the FMB’s five point plan to kick start the building industry which includes: Tackling the existing housing stock to make our existing homes more energy efficient. There is a new market worth between £3.5 and £6.5 billion per annum to refurbish our existing homes. What is needed is the push from the Government to kick start this market which would not only help the building industry but help meet the Government’s target to cut carbon emissions and reduce fuel poverty.”
Berry said:
“The government should also Reduce VAT on repairs and maintenance. Reducing VAT from 17.5 per cent to 5% for all building repair and maintenance work would allow many of our empty homes to be brought back into use as the current high rate of VAT makes them too expensive for many owners to maintain or refurbish and encourages neglect leading to demolition and new build. Reducing the rate of VAT would also make it easier for people to make energy efficient improvements to their homes; not only reducing the carbon emissions of these homes but also making them more economic to heat.”
Berry continued:
“Simplifying the planning system would make a huge difference to builders and allow them to get on with their job. The planning system is the single most important factor inhibiting the construction of new housing. Despite recent reforms to the planning system we still believe more radical changes are needed to make the planning system more streamlined, less bureaucratic, more predictable, and quicker. Such changes could have a dramatic impact on helping to stimulate building activity and help build the three million new homes that are needed.”
Berry said:
“Abandoning the Community Infrastructure Levy. Section 106 agreements are already adversely affecting the affordability of housing by increasing the costs which have to be recouped via the sale of the remaining housing stock on any given site. However, more alarming is the Government’s proposed Community Infrastructure Levy (CIL) which is a further tax on housing development at a time when it is least needed. The Government needs to be aware that the Levy will only serve to act as a potential barrier to the provision of much needed affordable housing and should therefore rethink or better still abandon its proposed introduction.”
Berry concluded:
“Reforming Stamp Duty would also provide a boost for the building industry. The Government’s announcement that stamp duty land tax will not apply to purchases of residential property of £175,000 or less is welcomed but with the average home in England costing £178,364 those benefiting will be few in number. What is needed is a more radical reform of stamp duty so that only have higher rates of stamp duty apply to the proportion of the house price which is in the relevant band i.e. a graduated tax like income tax.”
