October 2008 – Reasons to be cheerful?
Financial markets have been going through unprecedented turmoil in recent months, and all industries have been dreading the possible impact on their own prospects. Construction, traditionally first into and last out of any recession, has felt some early pain, especially in housebuilding. Raising funds for new commercial developments has not been easy for the past year, but does the financial crisis necessarily spell doom and gloom for the real world of construction?
Most predictions suggest that Gross Domestic Product in the UK will move slightly into negative territory next year. Yet unemployment, outside the City, shows little sign of rising significantly and manufacturing remains robust, both good signs for construction demand.
The housing market attracts few buyers because of expectation of falling prices; but people need houses and before long averagely priced houses will look affordable to people on average type incomes and the sector will recover. In the key City property market, there is an oversupply of office space, caused mainly by speculative building running ahead of demand. But the virtual freeze on funding for new developments means there is likely to be an undersupply as soon as 2010 which will bring forward new projects.
Pain will be felt, and although nobody can confidently say how long it will last, there are forecasts suggesting that this downturn will not be as bad as those in the recent past, and will not last as long.
And there are still bright spots amidst all the angst. In this month’s issue of NSC we carry a story about the booming Aberdeen property market, which looks likely to power on through the downturn. The city council has pledged to make Aberdeen an architectural leader, which is good news for steel since most quality modern architecture benefits from the advantages of steel.
In London, the Olympics building programme is now underway and will provide a vital boost. Up and down the country there are still town centre shopping developments underway and others still planned to start over the next six months or so.
If the more optimistic forecasters are right and we are not on the verge of a recession but only of a downturn in the economic cycle, despite the troubles of the financial sector, then after a year or so the upward trend in workloads should resume.
What will the steel sector do during that time? Keep its nerve for a start, and continue to invest in the sort of improvements that have led to consistent productivity advances over 20 years or so. That is what clients appreciate and what has carved out the dominant market position that steel enjoys in the UK.