November 25 2010

Planning for 2011

As a company with a large customer base rooted in the construction and civil engineering industry, trying to plan for 2011 is becoming increasingly difficult.

Standing back, and looking at the wider perspective, the UK economy grew by 0.8% in the third quarter, although less than the previous quarter, it’s still growth and it helps suppress the fear of a double dip recession. It seems that stronger exports to some extent underpinned these figures and that ties in with a recent report published by the Engineering Employers’ Federation which stated that output from British factories is growing at its fasted rate since 1994. But what of construction output? – well in Q2 for 2010 output increased by 9.5% but Q3 fell back to a less impressive increase of 4.0%. Overall construction output has still increased by 11% since Q3 in 2009 once a couple of negative growth quarters are taken into account , but even so this year the UK may still be around £10bn off the size of the industry at its height in 2007. The comprehensive spending review (CSR) provided an inconsistent package to the construction and civil engineering industry, as we have noted before, with some sectors like infrastructure fairing better than others. Since then the Department of Transport have made further announcements impacting on construction including last week’s commitment to Thameslink and the electrification of various lines around the UK . Impacting on the speed at which Thameslink rolls out however is the fact that it will be ‘reprofiled’ which will spread the investment over a further two years.

Whilst all announcements regarding major new work are welcome and will benefit the industry we must remember that the Government will still cut out £20bn of capital spending over the next four years. That plus the fact that decisions are yet to be made on a other infrastructure projects mean that actual jobs created in front line activity on these headline projects may not materialise as quick as we would hope. These are possible reasons why the CECA (Civil Engineering Contractors Association) are reporting a further drop in workload by their members in their recent Workloads Trends Survey for October. Our own experience shows that 2010 saw a delay to many contract starts through the period of uncertainty surrounding the change in Government and pending the Budget and CSR. Now that the situation is clearer and the route forward set out, it doesn’t mean that new starts on newly announced or re-shaped projects will be along shortly. Design delays as a result of required cost savings, reorganisation of funding packages and new procurement mechanisms will all lead to postponed contract starts in 2011.

Planning forward for 2011, to maintain our business in a ‘ready state’ to satisfy customer demand is indeed a challenge. Recruitment and support services is by its very nature flexible and responds to customer expansion and contraction. As we are a step removed from our own customers’ orders we have to keep one eye on the market place at all times and if our customers are unclear about their future order books because of market uncertainty then it’s our business to understand what’s happening out there, knowing where jobs are, where they might be and where candidates shouldn’t waste their time. We can see where the pipeline of recruitment opportunities is on work that’s coming through but it’s not easy at this point to programme them in, so potential job seekers should stay in touch – as we will be watching out for opportunities on your behalf.

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