THE amount of infrastructure construction projects across the North East failed to pick up during the second quarter of 2012, despite the Government’s attempts to boost the sector through private sector investment.
Infrastructure workloads across the North East fell during the three months to June, according to the latest Royal Institution of Chartered Surveyors Construction Market Survey, and little improvement has now been seen in the sector since 2007.
This is despite attempts by the Government to stimulate the economy through privately funded infrastructure projects. Last November, Chancellor George Osborne announced plans to raise £20bn from pension funds to help fund government projects from high-speed rail lines to power stations.
The Government has signed a memorandum of association with the Pension Protection Fund (PPF) and industry body, the National Association of Pension Funds (NAPF) to launch an infrastructure fund that will invest in new projects.
This low level of activity was reflected across the entire construction sector in the North East with 10% more respondents reporting falls rather than rises in workloads.
However, it is the public sector where the pressure continues to be greatest. Perhaps unsurprisingly, given the economic climate, profit expectations in the region continue to deteriorate, with the net balance falling further than the national average.
RICS said this reflects the continuing pressure on margins as input costs in the North East rise more rapidly than output prices. Surveyors note that increasing competition is leading some companies to bid for work at below cost price in order to secure contracts.
The North West was one of several areas to see a drop in workloads along with the North, Scotland and Northern Ireland, while the South, Wales and Midlands saw the amount of work stabilise.
Looking ahead, in spite of the downbeat picture for the sector over the three months to June, surveyors in the North East are optimistic, with a net balance of 21% more surveyors predicting workloads will rise over the coming 12months.
Simon Rubinsohn, RICS chief economist, said: “Infrastructure workloads failed to pick up across the North East, despite the Government’s attempts to boost the sector through private investment.
“More action is needed to back up the rhetoric if the construction industry is to play a meaningful role in driving the economy forward over the next few years.
“Ominously, profits continue to be squeezed with some surveyors in the North East reporting that increasing levels of competition are leading some companies to bid for work at a below cost price in order to secure contracts.”
Nationally the RICS survey said 4% more respondents reported falls rather than rises in workloads.