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Construction and real estate firms optimistic but...

Optimism and expectations of an increase in turnover and profits have increased among construction and real estate privately-held businesses (PHBs) in the UK compared with 2009.
However, a shortage of orders remains the greatest constraint, according to a report from financial and business adviser, Grant Thornton UK LLP.

Research from the latest annual International Business Report (IBR) reveals a more positive sentiment this year than last among UK construction and real estate PHBs (unlisted companies including family businesses, entrepreneurial and SMEs).

According to the report, a percentage balance of +13% are optimistic on the outlook of the UK's economy for the next 12 months compared with -20% in 2009.

Expectations of turnover/revenue and profits have also improved this year, with 37% anticipating an increase in profits compared twith 32% in 2009. In addition 43% expect turnover/revenue to increase in 2010 compared with 34% last year.

Despite the optimism, a shortage of orders remains the greatest constraint for construction and real estate PHBs during the next 12 months, the same constraint topping the list a year ago.

Although a slight decrease from 2009, 51% cited this as the greatest constraint compared with 52% last year.

However, apparent constraints over financing have not led to an appetite for growth through acquisition or a public listing.

According to the report, 84% of construction and real estate businesses have no plans to grow through acquisition in the next three years.

Similarly, a high number, 68% do not anticipate a change in the ownership of their business in the next three years and more still, 81%, do not anticipate that their business will undergo a public listing over the same period.

'Optimism in the sector has seen a slight increase from 2009 as construction and real estate PHBs show signs of recovering from the very difficult conditions seen last year,' said Kathryn Hiddleston, head of construction at Grant Thornton.

'However, recovery in the sector will be very dependent on access to finance becoming more available and there is a lot of pressure on the banks to ensure this is the case.

'Despite the optimism, the majority of construction and real estate PHBs still cite a shortage of orders as the greatest constraint, which may worsen if any announcements in the up-coming Comprehensive Spending Review prove detrimental to the sector.

'What also might be worrying for the industry are signs of a decline in property prices which won't be helped by a lowered economic growth forecast in the UK and inflation staying higher than previously forecast.'

18 August 2010

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