Recession?

With recent commentary announcing the beginning of the end of the deepest recession since the Second World War (or at least the last one) is this optimism echoed across our industry?  We thought we’d ask some of our editorial contacts their views on whether we are out of the woods - or how long they think it will really be before we can all stop holding our breath.

Denise Chevin
Editor, Building

There is so much uncertainty at the moment because of next year’s general election and what the severity of the cuts will be in public spending. General elections always create a hiatus too. Some commercial schemes might start flickering into life at the back end of next year but generally I would expect the industry to be in for a very tough couple of years.

Rory Olcayto
Features Editor, The Architect’s Journal

When I spoke with Richard Kauntze, chief executive of the British Council for Offices in May this year, he told me: “It will be the third quarter of 2010 before the market picks up.” I asked him if he meant the office sector. He told me, “No, I mean the entire construction industry.” I think he was being optimistic. For architects I fear, it will be 2011 before the turnaround begins.

Today, there are more than 2000 architects on the dole, double the figure of seven months ago. This suggests the profession has yet to bottom out. Archial the fourth biggest practice in UK according to the AJ100 ratings, is on a four-day week. RIBA’s future trends survey shows that in July, 22 per cent of practices said they were underemployed. This month it’s 30 per cent.

Add in the likelihood of the Tory’s winning the next election and further cuts to public sector spending - the sector which many architects are counting on keeping them afloat - we shouldn’t raise expectations for quite a while yet.

 

Ben Roskrow
Editor, Housebuilder

Are we coming out of recession? Yes, but as to whether this means better times ahead in the short term for business is a more complex question. In my sector of interest, housebuilding, there are clear signs of recovery with visitor numbers up, reservations up, cancellations down and new sites opening. However this recovery is uncertain and fragile and cannot be relied on as a clear indicator of better times ahead. Rising unemployment, a difficult mortgage market, the artificial impact on the market of HomeBuy Direct and Kickstart and a looming election all suggest the road ahead will be bumpy. But hey, at least we are not still in the nightmare of 12 months ago! And in the long run, we desperately need housing - so hang on tight.

 

Terry Smith
Editor, Professional Builder

It doesn’t need us to tell our readers how tough it is out there currently, so don’t be surprised by the absence of doom and gloom laden stories within the pages of Professional Builder Magazine. What our readers need more than ever is inspiration and hopefully a reduction in pages hasn’t reduced our capacity to keep them well informed and positive.

That said though, it’s abundantly clear after a decade of unprecedented prosperity, and full order books within the construction industry, the smaller/medium sized contractor is finding work significantly harder to come by. Unlike previous recessions, this one left little time to batten down the hatches, such was the speed and ferocity of the banking collapse. Hopefully those who enjoyed the boom years have put something away for a rainy day.

Traditionally, the RMI market has performed better than most sectors of the industry during an economic downturn, and again this seems to be holding firm, with home owners increasingly looking to the old adage of ‘don’t move, improve’ to enhance their quality of life. Investing in a property is still the best long term policy for a healthy return and latest figures show that the extension market in particular is bucking the trend. In fact, a recent survey revealed that London and some towns in the south east actually showed a substantial increase in applications during the first months of 2009 compared to previous years.

With loft conversions, garden improvements, new kitchens and bathrooms all apparently up for grabs there is still much to feed the staple diet of the jobbing builder fraternity. Perhaps the greatest difference being that, whereas most builders we talked to previously could look forward to a full order book for the next six months at least, now it appears there is a much more hand to mouth existence, with margins under intense pressure.

This is reflected in our own day to day experience in putting the journal together with the number of editorial pages directly proportional to those dedicated to advertising. Even allowing for seasonal variations the issue sizes have fluctuated wildly as the year unfolded, with many potential advertisers reluctant to commit beyond one issue at a time. Interestingly, we have found a number of manufacturers who have enjoyed great success in promoting their wares to the smaller end of the market for the first time.

Over the next few weeks we may have a clearer picture of what’s in store for 2010. Certainly the consensus of well informed opinion is that we have been through the worst of the depression and, with encouraging signs on the house building front and a significant increase in home loan approvals, a small but encouraging corner has been turned. However, with much uncertainly still surrounding the state of our banking system, and the prospects of a general election, and the possibility of a change of Government with all that entails, the old crystal ball is likely to remain distinctly cloudy for the foreseeable future.

 

Fiona Russell-Horne
On-line Editor, Builders Merchants Journal

Are we out of recession yet? No. Are we going to be out of recession anytime soon? No. The downturn was too sharp and too painful for us to bounce back this year or even the early part of next. Having said that, I think we are bumping along the bottom and there are definite signs that the start-up of stalled housing developments is being reflected in some heavyside building material sales. It’s going to be a long haul though. House prices maybe creeping back up, but only in those areas where there is a shortage of property on the market. Hundreds of thousands of jobs have already been lost in the construction industry and you don’t repair that kind of damage to an industry overnight. We may no longer be in intensive care, but we’re still pretty ill. Best guess for a real recovery - tail-end of next year.

 

Stuart Hamilton
Editor, Professional Heating & Plumbing Installer

Back when the recession was in its infancy (and referred to more jauntily as a credit crunch), the consensus of industry research intimated that the heating and plumbing sector would have greater immunity than most when it came to an economic downturn. And while the market has been by no means bulletproof, in relative terms it has held up reasonably well in the face of decline.

In the absence of substantiated figures at this stage, anecdotal evidence suggests that both unit sales and merchant footfall have suffered, but the ‘distress purchase’ element of boiler sales in particular is likely to help to underpin the sector in the short term. It appears we haven’t turned the corner yet (and some may argue that the corner isn’t even in sight) but if the sector has now bottomed out, we could consider ourselves fortunate to have found a higher trough than many.

 

Claire Mackle
Editor, ABC&D

There are conflicting messages about the current state of the construction industry. We’ve seen a recent stabilisation in housing planning applications and the amount of new projects press releases reaching my desk is definitely increasing, yet the Office for National Statistics reports further deterioration in construction activity. Whether we are coming out of this recession I feel it’s too early to call. Certainly on ABC&D we have found that maintaining our publishing disciplines and offering valuable content about the market have enabled us to weather the storm. I estimate that we’ll experience a slow and steady recovery and we’ll not see any significant change until next spring.

 

Jane Fenwick
Editor, IML Group
So far the FM sector has proved to be fairly recession proof. There is plenty of activity with new contracts opportunities - some are very large - but there is also an emphasis on cost cutting and service reappraisal. As the large contractors focus on the big prizes, there is an opportunity for new players and existing smaller FM providers to win contracts among the medium sized corporates who are looking to rationalise their support services.  However, as the political parties gear up for the election, expect business decisions to be put on hold through most of 2010 until the dust settles. Whoever wins the election, public sector expenditure will be cut and taxes will go up. This could have an impact the volume of new FM work but there is sufficient activity across both the public and private sectors to sustain the FM sector through this recession.

 

 

Nick Edwards
Editor, Construction News

For construction I have no doubts that next year will be tougher than this one as major contractor order books are hit, election hiatus looms and tender prices continue to be forced down. Leading indicators like the Construction Products Association quarterly forecast continue to put back recovery. Of course prospects arent consistent. Anyone heavily exposed to public sector will be forced to fiercely defend their existing relationships and seek new ones; while infrastructure feels much more certain in its spending profile over the next couple of years. On the plus side the panic of nine months ago has passed and companies seem to be planning sensibly again - including in their marketing investment.

 

Ian Latham
Publishing Editor
Architecture Today

Architects tend to be resourceful, flexible business people and most tell us they are weathering the storm reasonably well, with many finding clients and work in sectors they had previously neglected. Many say they have seen an increase in enquiries in recent months and they anticipate these will translate into commissions towards the end of this year and the start of 2010 - and almost all are expecting more activity next year as projects previously put on hold become viable again. Specification if course is still going on - construction activity has dipped but there’s still a lot going on, and architects are taking more care over the products and services they specify. Indeed, history suggests that some of the best buildings emerge during dips in the economic cycle - there’s nothing like a limited budget and a little more time to focus the mind on achieving both quality and value.