Click Here to go to the Construction News Archives

NFB Calls for Home Office Investigation into Illegal Workers on Site

The National Federation of Builders has called for the Home Office to commit to a full investigation into the use of illegal workers on UK construction sites. The call follows the recent report by the London Evening Standard which exposed dozens of companies hiring immigrants in North London. Alistair McHarg, chairman of the 3,000-member strong NFB, said: ‘The Evening Standard investigation only hints at the scale of the problem.

‘Even the Home Office has admitted there is likely to be hundreds of thousands of illegal workers without proper training, skills or health and safety awareness working on site. This is placing thousands more legitimate workers at risk.

‘We believe a full investigation should be carried out nationally to determine the true extent of the problem.

‘In the meantime immediate recommendations need to be put forward outlining how the Health and Safety Executive, the Construction Skills Certification Scheme, the CITB and the trade unions can work together with employers organisations to clamp down on this practice.

‘This could be an issue for the Strategic Forum to take a lead on since it affects the industry’s image as well as the viability of its employers and the safety of its employees.

‘This federation is committed to achieving a fully qualified workforce by 2010 but the industry needs more direct support to curb the problem.

‘Threatening prosecution isn’t enough to discourage unscrupulous employers from using black market labour.

‘The wider problem is the fact that, in this country, companies can set up overnight and begin trading as building contractors without qualification or any form of registration.’

Taylor Woodrow to buy Wilson Connolly

Taylor Woodrow catapulted itself up the ranking of UK housebuilders, announcing that it was buying rival Wilson Connolly for £480m ($759m).

The deal, which will make Taylor Woodrow the UK's fourth largest builder by volume, will see Wilson Connolly shareholders receive 200p in cash and 0.132 new Taylor Woodrow for each of their shares.

The directors of Wilson Connolly, who along with the Wilson Connolly family have already given irrevocable undertakings of 25.8 per cent of the shares, have asked shareholders to accept the deal, which represents a 10 per cent premium to Wilson Connolly's share price before the deal was announced.

Ian Napier, chief executive of Taylor Woodrow, said the rational behind the deal was the geographic fit between the two builders, which would increase scale to about 10,000 housing completions a year.

‘For us its an ideal fit geographically, it is the best fit for Taylor Woodrow out of all the housebuilders,’ he added.

But Mr Napier, who confessed that the two groups had been talking since the middle of June, denied that the group may have paid more than necessary, given the recent share price rise at Wilson Connolly.

‘I don't think we waited too long, it is a fair and reasonable offer for the business,’ he said, also shrugging off suggestions that there might be a counter offer.

Taylor Woodrow, which two years ago sparked the first wave of consolidation and increased its housebuilding activities with the acquisition of Bryant Homes in 2001, is expecting cost savings of £25m following the deal.

Taylor Woodrow said that the savings, which would require a one-off cost of £20m, would come from rationalising the regional office structure, improved purchasing prices and elimination of duplication.

Mr Napier admitted that the cost savings would include job cuts as the two businesses reduced their regional offices from about 20 to 10.

About 300 staff, out of a combined 5,000, are expected to be made redundant.
Based on the 2002 results from both groups the combined group is expecting pro forma annualised turnover of £2.9bn and operating profits of £325m, as well as the completion of 10,200 homes.

The two group's, who like others in the housing market are facing increased pressure to find affordable land, will now have a combined land bank of more than 37,000 plots, representing a supply of 3.6 years. Mr Napier said the group would continue to invest in land to keep supply at about the three-year mark.
If the deal is successful Graeme McCullum will join the Taylor Woodrow board to help run the UK housing division.

Because of the deal Taylor Woodrow has now put its share buy back programme on hold until 2004.

The news of the takeover came as both group's released their interim results. At Taylor Woodrow, pre-tax profits rose by 20 per cent from £108.1m to £130.1m. Analysts had been expecting profits in the region of £115m.

Turnover rose by 7 per cent to £1.06bn, helped by an increase in the average selling price from £184,200 to £187,800. Margins also moved ahead up from 14.2 per cent to 15.8 per cent.

The interim dividend was 2.4p, on earnings per share of 15.3p against 12.7p last year.

Wilson Connolly also had a strong half year performance with a 69 per cent rise in pre-tax profits to £27.2m in the six months to June 30th.

The rise in profits was driven by a strong increase in margins from 8.3 per cent to 11.7 per cent.

But turnover fell by 4 per cent to £324.7m as the number of legal completions also dipped, reflecting the group's focus on more expensive houses.

Builder puts up Profits

Housebuilder Wilson Bowden has reaped the benefits of the UK's robust housing market with stronger profits.

The half-year profits beat market forecasts. Pre-tax profits for the six months ended June 30th rose to £91.4m from £76.6m a year earlier. Analysts had earlier forecast profits of around £85m.

Cheap loans
British housebuilders have benefited from historically cheap home loans in the UK. Wilson Bowden's higher profits followed a similar rise in earnings this week from Persimmon, the UK's biggest housebuilder by market value. Shares in Wilson Bowden rose 1.4% to £10.70 in early trade, a new 12-month high for the stock.

'These record results demonstrate the strength of our spread of operations and the resilience of the housing market,' chairman David Wilson said.

Soft landing
The average price of a Wilson Bowden home is £205,000. CEO Ian Robertson said prices might come down in the near future, but the company still expected stable market conditions. 'I can see a soft landing in prices, and market conditions look fair for the next six to 12 months,' he said.

Bellway on Course for Record Showing

Bellway Homes has forecast a record year after seeing selling prices of its homes rise by more than a fifth.

Newcastle-based Bellway said it anticipates producing 'yet another record set of results' for the 12 months to July 31st.

The group says the average selling price of its homes has improved by more than 20% to about £145,000 during the year.

It attributed the rise particularly to a market repositioning of four of its 14 divisions.

Until last year, four of its divisions - in the East Midlands, West Lancashire, the Thames Gateway and Yorkshire - had specialised in developing sites benefiting from urban regeneration grants.

But following changes to the schemes in question last year, Bellway said prices of homes built by the four divisions had moved more into line with others in the group.

It has meant that the average selling price of a home offered by its East Midlands division, for example, has risen from about £80,000 last year to £130,000 in the current year.

Bellway has increased the number of homes sold in the last 12 months from 6,044 to 6,278 and now has a forward order book worth £380 million, 17% more than a year ago.

The group said demand for its homes had remained robust, although sales of homes priced at more than £300,000 in the South East had slowed. Its bottom line pre-tax profits last year were about £125.3 million against around £101 million in 2001.

US investment bank Merrill Lynch is forecasting the group to post full-year profits of about £159 million on October 14th.

New Hope of VAT Cut for Construction Industry

The European Commission has proposed enshrining in European law the right to reduce VAT on the construction and repair of houses to a minimum of 5%, putting pressure on the British government to abandon its full-rate policy.

The move is part of a comprehensive review of European VAT regulations, aimed at better harmonising the EU's national systems, which vary widely regarding which goods and services attract reduced rates.

At present, 12 member states apply reduced rates under special national exemptions to the construction and repair of housing, a right that is limited by EU regulations to social housing projects.

The proposal from the Commission would extend this right to all housing construction in every member state.

This move follows pilots of low VAT schemes in the renovation and repair of private dwellings.

The scheme was trialled in the Isle of Man, Ireland, Belgium, Greece, the Netherlands and Portugal, but not in mainland Britain.

Given that the pilot is being wound up (with construction being the only industry where the exemption will be made permanent), it is unclear whether the temporary exemption in the Isle of Man will be extended.

Multi-Billion Pound House-Building Package Announced

John Prescott has announced a multi-billion-pound spending package aimed at delivering 120,000 homes and 180,000 jobs in the Thames Gateway area by 2016.

The Deputy Prime Minister has also earmarked extra money for three other growth areas, Milton Keynes in the South Midlands, London-Stansted and Cambridge, and Ashford in Kent.

Five priority areas are being targeted in East London, Greenwich-Woolwich, Barking Reach, Thurrock and North Kent-Thameside, where £330 million will be spent over the next three years on 100 projects to open up key development sites.

It is expected that this will lever in at least £1-2 billion from other public and private partners.

The move is part of the Government's bid to ease the housing shortage in the South East and provide more affordable property for public sector workers.

Mr Prescott said 'Today marks the start of a real and long-term commitment, coupled with long-term delivery.

'The money I am allocating will help to kick-start the process of turning Europe's largest collection of brownfield sites into living, breathing communities where people are proud to belong.

'But we are being careful to ensure that growth is properly managed and we stand by our commitment to maintain or increase the green belt and stop the profligate use of land.'

The Gateway package includes £130 million for projects at the London end of the Gateway, including Stratford, the Royal Docks, Greenwich, Woolwich and Barking Reach; £100 million for North Kent; £91 million for South Essex, more than £100 million to be allocated shortly for projects awaiting approval, creation of Urban Development Corporations in Thurrock and East London.

The Government also announced new arrangements for the disposal of surplus public land to ensure that other public sector bodies have the first option to buy and a joint English Partnerships/Housing Corporation competition to develop 56 sites in former new towns, producing up to 1,300 homes by 2005.

Country Feels the Pinch as Housing Market Slows

The reported recent cooling in the property market is having an impact on the country's more expensive properties, with sales of prime country houses falling
in nearly every county in the south of England.

Country Life magazine, which analysed all the properties advertised in its columns during the first six months of 2003, said there had been a 22% fall in the number of homes put on the market in Surrey compared with the same period of 2002, while in Berkshire there was a 26% drop and a 21% decline in Oxfordshire.

But Wiltshire bucked the trend with a 17% increase in the number of country houses for sale - with 152 homes advertised in the magazine from the county during the period, it was the busiest region in the country.

Northamptonshire, Lincolnshire and Derbyshire all also reported increases in activity, with Derbyshire seeing a five-fold rise in the number of properties advertised, with 36 homes advertised compared with six the previous year.
'Stagnation in the London market is having a profound effect on the rural housing scene,' said Penny Churchill, property correspondent at Country Life.

She added that with people in London unable to sell their homes in the capital, the rural property market was being dominated by the very rich and local buyers in regions where the economy was less influenced by what happened in the City.

She said some properties had sold for considerably more than their guide price as a result of bidding wars among the rich for 'trophy houses'. But she added: 'On the other hand, some quite delightful country houses in the home counties remain unsold, despite months of marketing effort, and prices have started to fall back towards the levels of two years ago.

'With a few notable exceptions, anything priced at more than £3m is proving difficult to sell in all parts of the country.'

Wiltshire saw the greatest number of properties come on the market during the first six months of the year, followed by Surrey which, despite a 22% fall, still had 151 country homes advertised in the magazine, and Hampshire which had 131 advertised - although this was 15% less than during the first half of 2002.

More Youngsters Eye a Career in Construction

Applications for college construction courses for 16- to 18-year-olds are up by 19% and for 19 year-olds up by a quarter, according to a Construction Industry Training Board (CITB) survey.

The survey of 67 colleges revealed that 74.6% thought they could be oversubscribed next year, but 48% of colleges need to find jobs or work experience places for their applicants.

Meanwhile, last month's CITB marketing campaign designed specifically to encourage more employers to take on apprentices was a success, generating 972 enquiries from employers and identifying 1,402 vacancies for apprenticeships, 179 from employers that had never taken on an apprentice before.

Despite the success of the campaign, more employers are needed. CITB's business area manager Paul Sykes said: 'Many contractors are unaware that current interest means they will have several applicants to choose from or that there are grants available to help fund the training.

'We are offering substantial grants, 6,000 per apprentice, to help employers cover the costs of taking on an apprentice.'

The CITB has sent CD-Roms promoting construction to schools in England and Wales.

Wimpey Builds up Further Profits Growth

George Wimpey has posted a 42% increase in interim profits after seeing the UK housing market return to 'more sustainable levels'.

The London-based group said pre-tax profits rose to £122.7 million from £86.3 million in the half year to June 30th.

The group said its operating margins had increased significantly, while its costs were under control with land banks well positioned to support growth in 2004. It also reported a strong order book.

Chairman John Robinson said the strong set of results showed the group had built on last year's progress.

'The UK housing market has returned to more sustainable levels, the US market is strong and demand for our products remains healthy,' Mr Robinson said.

As well as its George Wimpey UK business, the group owns Laing Homes, McAlpine Homes and US arm Morrison Homes.

Operating profits in Wimpey's UK division rose 26% to £114 million despite lower volumes while recent acquisition Laing Homes performed in line with expectations. It should make planned cost savings of £10 million from 2004.

Elsewhere, the US arm saw operating profits lift 64% to 45 million US million dollars (£27.7m) on better volumes and margins.

Group operating profits rose by 40% to £148 million from £105.5 million in the first half of 2002.

The group posted a 19% rise in its interim dividend to 3.8p per share, which it said reflected a change in policy towards enhancing its dividend growth rate.

Housebuilding: April to June 2003

This is the first in a new quarterly series of housebuilding statistical releases, presenting figures on new starts and completions for England and its regions, Scotland, Wales and Northern Ireland. It also provides information for England up to the first quarter of the 2003/04 financial year (April to June).

Summary
Latest figures for the quarter ending June 2003 show:
- increases in housing starts and completions in England are up 10 per cent and 3 per cent respectively on the same period in the previous year. This continues an upward trend evident throughout the financial year ended March 2003.
- varying trends in the English regions: housebuilding has increased in the East and South East and London over the last two to three years, although more recently the trend has levelled in London. The East Midlands has also seen a recent upturn in starts. Housebuilding has remained level in the Yorkshire and the Humber and the West Midlands and fluctuated in the North West. The North East, however, has seen a decline in activity.
- latest UK figures for 2001/02 show 195 thousand housing starts - an increase on previous years. UK completions in 2001/02 remained more level at 176 thousand.
- starts in Scotland were up in 2002/03 compared with the previous year. Wales, however, experienced small declines in starts and completions. Northern Ireland has seen increased housebuilding since 1999/2000.

Recent Trends in Housebuilding in England
In the quarter ending June 2003, some 42 thousand dwellings were started in England. This compares with 38 thousand in the equivalent quarter of 2002/03, an increase of 10 per cent. The trend in the quarterly rate of starts has increased gradually since the beginning of 2001/02.

Completions have also increased. In England, some 35 thousand dwellings were completed in the quarter to June 2003 compared with 34 thousand in the same period in the previous year, an increase of 3 per cent. There has been a modest upward trend since the first quarter 2002/03.

Housebuilding around the UK
Latest available UK figures for 2001/02 show there were 195 thousand housing starts and 176 thousand completions. Starts show an upward trend from1998/99 but completions have remained more level.

In Scotland during 2002/03, there were 23.5 thousand starts, up 2 per cent on the previous financial year Completions, however, remained level.

Starts and completions in Wales were down in 2002/03. Starts, numbering 9 thousand were down 1 per cent and the 7.9 thousand completions down 4 per cent on the previous financial year.

Housebuilding in Northern Ireland has shown a strong upward trend in recent years, 2001/02 (the latest available information) saw 12.9 thousand starts and 13.4 thousand completions, both around 15 per cent up on the previous year.

Housebuilding in the English Regions
Trends in housebuilding have varied across the regions.

Yorkshire and the Humber and West Midlands have seen relative level trends in quarterly starts and completions. The North West experienced a sharp decline in completions from 2000/01 but there has been some recent recovery. Starts in the North West have remained level. The North East has seen a decline particularly in completions. The East Midlands has seen an upturn in starts over the last two years.

The South East has had a modest increases since the beginning of 2001/02. London saw increases in starts and completions from 2000/01 but these trends have recently levelled. The East has had a recent upturn in starts and completions. Housebuilding has remained level in the South West since 1999/00.

June Orders Drop, but First Half Surges Ahead
Total new construction orders dropped by 5.8% in June, but this hasn't stopped the total for the first half of 2003 staying 6.1% ahead of the same period last year.

Orders totalled £2.4bn in June 2003, compared with £2.6bn in the same month of 2002. Only private housing and the other public sectors were ahead year-on-year by 6.5% and 24.1% respectively.

Private industrial dropped 5.2%, public housing slipped 9.6% to its lowest monthly total since December 2002 and private commercial fell 11.7%. Infrastructure work continues to disappoint, falling 42% year-on-year.

However, because 2003 started so well, the poor June has not significantly affected the first half. In total the first six months of 2003 generated £17bn of new orders, compared with £16bn in the same period of 2002. Only two sectors recorded a drop year-on-year: private commercial and infrastructure were down 7.5% and 9% respectively.

Private industrial barely inched ahead, public housing incresaed by 19.5%, while private housing and other public jumped 25%.

June construction orders
Public housing £84m (2002: £93m )
Private housing £702m (£659m)
Infrastructure £257m (£443m)
Other public £529m (£426m)
Private industrial £163m (£172m)
Private commercial £723m (£819m)
Total £2,459m (£2,612m)
 
First half construction orders
Public housing £777m (2002: £650m )
Private housing £4,701m (£3,758m)
Infrastructure £2,980m (£3,277m)
Other public £2,919m (£2,337m)
Private industrial £1,094m (£1,083m)
Private commercial £4,615m (£4,990m)
Total £17,089m (£16,097m)

The Construction Boom is Over

The boom in Britain’s construction industry is over according to Experian® Business Strategies in its latest forecasts for the construction industry. After achieving 8 per cent growth in 2002 - four times that of the whole UK economy last year - growth in construction output is set to moderate to 5 per cent this year and just 2 per cent in 2004.

The reduction in growth will be largely due to falling levels of activity in industrial and office construction and in private house building.
Construction in transport, education, health and social housing will continue to rise, although the high levels of growth experienced in 2002 are unlikely to be maintained.

James Hastings, Associate Director at Experian Business Strategies, said: 'Whilst construction activity is being boosted by the Government’s commitments to improving public services and social housing, private sector work is now thinner on the ground.

'There is likely to be a sharp contraction in office construction following the slowdown in the office market in London and the South East and the decline in corporate investment.

'House building is expected to fair well this year as many houses were forward sold during the boom, but as the housing market continues to cool, output is expected to stagnate in 2004'

The prospects for industrial construction remain weak and, even with an improvement in performance of the manufacturing sector, it will take considerable time for investment in buildings to recover.

Public non-residential construction is expected to be the star performer in the industry, fuelled primarily by expenditure on education and health facilities, but with further boosts from new public offices and a large programme of works for housing of the armed services. Public housing building will benefit from the Government’s commitments to provide affordable housing in the South East and large regeneration projects throughout the country.

Large transport projects such as Heathrow’s Terminal 5, the Channel Tunnel Rail Link, the upgrade of the West Coast Main Line and the regeneration of London Underground will ensure continued growth in infrastructure activity.

The forecast for construction output compares with GDP growth of 1.8 per cent in 2002 and forecast growth of 2.2 per cent this year, 2.6 per cent in 2004 and 3 per cent in 2005.

DTI: Billions of Opportunities for the Construction Sector

The construction industry could benefit by billions of pounds by following the principles of the Rethinking Construction programme, a new report published on 9th July shows.

Launching Demonstrating Success through Rethinking Construction, DTI Minister Nigel Griffiths urged more firms in the industry to adopt the agenda behind the initiative.

The report documents the progress of all 374 active and completed Rethinking Construction demonstration projects.

It shows that if just one third of the industry applied the principles of Rethinking Construction to their projects:
* client construction costs could be reduced by #1.4 billion;
* the cost of accidents could be reduced by #1.2 billion; and,
* organisations could deliver an additional #446 million in profit.

Mr Griffiths announced that the Rethinking Construction organisation would now be known by a new name - Constructing Excellence. The move reflects the merging of the DTI's Construction Best Practice Programme with Rethinking Construction. He also announced the appointment of Professor Dennis Lenard as Chief Executive of the new organisation.

Mr Griffiths, the Construction Minister, said:
"Over the last four years, these projects have consistently outperformed the industry average.

'Organisations that regularly participate in demonstration activities have achieved more predictability on cost and time and greater productivity, as well as being almost three times safer, being more environmentally friendly, having fewer defects and achieving higher customer satisfaction.

'There's a clear business case for adopting the principles behind the programme.'

Praising the £83 billion contribution of the construction industry to the UK economy, Mr Griffiths added:
'This vital industry has the potential to power us past our competitors as third biggest economy in the world within a decade. I urge more firms to take up the Rethinking Construction agenda.'

Welcoming the appointment of Professor Lenard, Mr Griffiths said:
'The bringing together of Rethinking Construction and Construction Best Practice will further unify this industry behind a cohesive, powerful body. Constructing Excellence will continue to endorse best practice and encourage industry-wide adoption of Rethinking Construction principles by businesses large and small right across the UK.

'I am very pleased that Professor Dennis Lenard has been appointed Chief Executive of Constructing Excellence. He brings with him a wealth of experience of the construction industry both from a UK and international perspective. I am confident he will be able to lead Constructing Excellence and help realise the Government and industry's vision for world-beating performance in the future.'

Slower Growth Expected for Britain’s Construction Industry

The growth rate of Britain's construction industry is set to halve in 2003, according to the latest forecast from analysts Experian® Business Strategies, which also forecasts that the growth rate will halve again in 2004. And 2005 will be even slower.

Growth of eight per cent is forecast for the current year, slowing to four per cent in 2004 and three per cent in 2005. This follows a 14 per cent rise in 2002.

Experian Business Strategies' Associate Director Jane Croot explains: 'Over the next two or three years, the growth in Government spending is likely to be weaker, a slowing housing market will cause housebuilders to be more cautious, and a subdued office market will lead to a fall-out in construction in the southern regions. Between now and 2005, office construction in the south is likely to move into recession.

'Northern and central regions are forecast to experience the strongest growth over the next few years. This year is expected to be particularly robust, with percentage growth in double figures for Wales, the North East, the East Midlands, the North West and Yorkshire and Humberside.'

She adds: 'In most northern and central regions, which are not so dependent on office construction, and where office markets are still relatively healthy, commercial construction is not expected to fall. But all regions are likely to see a moderation in growth next year and 2005. Central regions are set to see the highest growth rate at four per cent in both years, led by the West Midlands, Wales and the Eastern Region.

'In the north, growth of six per cent in 2004 is set to fall to two per cent in 2005 as activity in the North West declines, following a number of years of strong infrastructure work. Only marginal growth is expected in the North East. In Scotland, growth is likely to pick up towards the end of 2005 to six per cent.

'In the southern regions, construction growth of two per cent is expected next year, and three per cent in 2005. London is likely to see the weakest growth, and could even see a fall in activity in 2004.'

Construction Research Contracts Worth up to £6.2m go to BRE, CIRIA and Faber Maunsell

The Office of the Deputy Prime Minister announced on 23rd June key contracts worth up to £6.2m for research into building regulations issues to take forward the Government's strategy for improving quality of life in our communities.

Following competitive tender, BRE (Building Research Establishment), CIRIA and Faber Maunsell have been awarded Framework contracts to carry out the building regulations research programme for the next five years.

The need for the new contracts arose following the finish of a five year agreement by the then responsible Department of the Environment that it would guarantee the newly privatised BRE a minimum value of work each year until 2002.

Building regulations minister Phil Hope said:
'With the end of this agreement, we have had to consider new ways of getting research for the future. Competitive tender was essential to ensure we got best value for money but it also gave us a chance to consider new suppliers who could bring in fresh thinking on construction issues.

'Our tendering process also complied with specific recommendations on building regulations outlined in a review of government research and development policies and practices by Sir John Fairclough.'

(Sir John's recommendations included procurement on the basis of programmes, impartiality of provider, awards for long periods, a two stage bidding process and encouragement of consortia and networking.)

The five frameworks are:
- Structural Integrity: structural design, response to extreme loadings (Part A)
- Fire Safety: resistance, reaction, protection, detection and investigation. (Part B)
- Building Operational Performance: ventilation, sound insulation, building services and energy efficiency. (Parts C, F, E, J and L)
- Building Occupant Interaction: health, safety, welfare and convenience of building features for all users. (Parts K, M, N, Security)
- Sanitation: hygiene, water reuse, drainage and waste disposal. (Parts G and H)

An announcement is expected shortly on specific projects to be undertaken within each of the five frameworks.

Housebuilders Suffer Subsidence

Cracks started to appear in the housebuilding sector on 25th June after one fund manager decided to cut his exposure and rumours of tough trading at Berkeley Group started to filter through City dealing rooms.

Primarily because of low interest rates, the construction and building materials sector has been one of London's star performers this year, outpacing the FTSE All-Share index by 20%.

However, in recent days investors, worried about consumer confidence and recent cautious comments from Westbury, down 13p to 361.5p, have started to book some profits. That trend accelerated on 24th June after an institution dumped shares in two of the sector's biggest names - Taylor Woodrow and Barratt.

Using stockbroker Collins Stewart, the institution sold 10m Taylor Woodrow shares at 195p each and 7m Barratt ones at 420p. As a result, Woodrow closed 9.5p lower at 198.5p, while Barratt fell 19.25p to 427.25p. Meanwhile, Berkeley, the executive housebuilder, shed 26.5p to 695p amid talk that the outlook statement with full-year figures could trigger profit downgrades.

Given the firm's exposure to the deteriorating London property market, analysts would not be surprised if they need to readjust their estimates after the results.
Elsewhere in construction, retirement home builder McCarthy & Stone was under pressure after it rejected a bid approach from chairman John McCarthy and his sons.

However, the shares, which ended off their lows, down 17p to 487p, were lifted by a strong trading statement and speculation that Mr McCarthy, who is being advised by accountancy firm Pricewaterhouse-Coopers, may return with a higher offer. Broker Seymour Pierce reckons only an offer in excess of 600p is likely to prove acceptable.

In the wider market, leading shares failed to bounce back from 23rd June's drubbing as the aftershocks from the Heineken profits warning and Unilever trading update continued to reverberate round the market. Lacklustre economic data from the US did little to help sentiment.

The final scores showed the FTSE 100 index down 27 points at 4,060.9, taking its losses over the past two session to more than 100 points and leaving the index 160 points adrift of a recent nine-month high of 4,219.

Unilever, down 11% on 23rd June, was again among the biggest losers, hit by a torrent of broker downgrades. Goldman Sachs, Smith Barney and JP Morgan were among those to cut their ratings. Unilever fell 15p to 481p.

Elsewhere, the picture was no brighter, with the FTSE 250, home to most of the housebuilders, falling 71.6 points to 4,932.6, while the FTSE Small Cap index shed 19.3 to settle at 2,113.4. Market turnover improved, however, topping 2.8bn shares.

Bank Loses Its Confidence With Project 95% Complete

It is a sign of how little confidence some lenders have in smaller contractors. A bank recently forced a medium-sized general contractor to terminate its work on a new building at Western Kentucky University’s Bowling Green campus even though the project was 95% complete and proceeding on schedule. Planter’s Bank of Hopkinsville, Ky., used a $419,000 deposit by Star Construction to pay off most of that contractor’s $500,000 revolving line of credit.

Bank officials could not be reached for comment, but Star’s financial statement showed a loss. The bank 'obviously felt its loan was in jeopardy,' says Tracey Durham, the contractor’s bookkeeper, who adds that Star has been trying to convince the bank to release funds so it can pay subcontractors.

Madisonville, Ky.-based Star had a $14.6-million contract for a media and technology centre at the university that included a number of change orders. Formed in 1984, the contractor now employs 16 people and had $10 million in revenue last year. It has built jails, post offices and hospitals.

Acuity, a Sheboygan, Wis., surety bond firm on some Star projects, gives the contractor a vote of confidence. Greg Olsen, Acuity director of surety claims, says Star has a good reputation and has not experienced problems on any jobs for which the surety firm provided bonds. 'The work on this particular project has been done extremely well,' he says.

Rising bank foreclosures against contractors are a symptom of the tighter economy, Olsen notes. 'Unfortunately, this is becoming a more common occurrence in these days. In the go-go 90s, this didn’t happen because the next project was always there,' he says.

Although Star lost the project and is now suffering financially, the company’s owners are continuing to search for work and are bidding 'to keep the doors open,' says Durham. 'This is the hardest thing. We’ve never defaulted on a note. We’re going to make it through this. It’s in the Lord’s hands now.'

Acuity has hired Merit Construction, a larger contractor based in Knoxville, Tenn., to finish the state-financed job. A punch-list of finish work will be completed by late July.

A state official involved in the project says delays have been minimal.

By Jonathan Barnes (Photo courtesy of Sheryl Hagan-Booth/WKU)

Private Sector puts Brakes on Construction Growth

Private sector growth is forecast to fall sharply over the next three years according to the Construction Products Association's latest Construction Industry Forecasts, with output in 2003 forecast to grow by just 1.9%, dropping to 1% in 2004, with a slight rise in 2005 to 1.1%.
 
Commenting on the figures, Michael Ankers, the Association's Chief Executive, said:  'Last year saw buoyant private sector activity which, combined with increased Government investment, generated an 8% increase, the largest annual increase since 1988. However, weaker private sector activity is now forecast to cut back overall industry growth over the next three years.  A cooling in the general housing market and slower house price inflation is set to pull back private housing starts from 167,000 this year to 155,000 in 2005, and slow the growth in home improvement works.

 
'Private commercial output is also forecast to slow over the next two years. Falling uptake and increased availability in the key office markets, following retrenchment in the media and financial services sectors, has depressed the flow of new orders for office projects.As a result, office construction activity is forecast to turn down sharply as existing projects are completed, with some schemes awaiting tenants before proceeding to fit-out. Furthermore, weaker consumer spending growth is forecast to dampen retail and leisure construction activity, causing commercial activity to fall by 6.5% in 2003, and 4.0% in 2004.
 
'Our Forecasts show that the construction industry will be very much dependent upon the Government's investment plans for its growth over the next three years, with public sector growth (including PFI) forecast to increase by 6.3% this year, slowing to 5.7% in 2004 and 4.3% in 2005. However, Government has failed to meet its own targets over the last two years, and the recent decision to allow schools to use their capital funding to meet shortfalls in their revenue budgets, has set a worrying precedent that has dented industry confidence in Government's commitment to deliver.'

GO TO CONSTRUCTION ARCHIVE PAGE

RETURN TO HOME PAGE