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Optimism falls among privately held construction and property businesses, says Grant Thornton

Optimism among UK Privately Held Businesses (PHBs) in the construction and property sector has fallen by 77 percentage points this year compared with 2008, according to a report from leading mid-corporate advisers Grant Thornton. 

Research from the latest Grant Thornton annual International Business Report (IBR) reveals this year that a net balance1 of -67 per cent were optimistic about the economic outlook compared to +10 per cent in 2008, a fall of 77 percentage points.

According to the report, the greatest constraint over the next 12 months for UK PHBs in the sector is the shortage of orders/reduced demand (stated by 46 per cent of respondents). This is followed by the shortage of long-term finance and the cost of finance (both 24 per cent).

Contributing to the pessimistic outlook is a fall in expected employment growth in the UK property and construction sector. The percentage balance of PHBs in the sector which expect some level of employment growth fell by 59 percentage points (+42 per cent in 2008 to -17 per cent in 2009). Globally, employment growth expectations among property and construction PHBs fell by 32 percentage points.

In addition, PHBs in the construction and property sector are 65 percentage points less optimistic about their profitability prospects (-20 per cent in 2009 compared +45 per cent in 2008).  Globally, optimism regarding profitability expectations of PHBs in the sector dropped 43 percentage points in 2009 from last year.  

Daniel Hartland, Birmingham-based partner and member of Grant Thornton’s property and construction team, said: “The results from the IBR certainly echo what we are seeing across the West Midlands. Economic uncertainty is undermining confidence and the lack of credit and stringent lending criteria are inhibiting activity.

“We are currently seeing signs of severe contraction as the recession continues to take its toll. The credit crunch and a weakening housing market have hit the residential building market hard, while the bleak economic outlook and financial constraints are depressing new building projects in the industrial and commercial sectors.”

Grant Thornton’s IBR canvassed 7,200 businesses across 36 countries as well as the opinions of CEOs, MDs, Chairmen and senior executives within 600 large and medium-sized UK businesses.  

 

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