THERE MAY BE TROUBLE AHEAD

The damage wreaked by last November's Budget is clear for all to see in this week's building trade surveys. Both the BEC and the FMB figures for the last quarter of 1994 reveal an industry faltering alarmingly. Output has declined, many companies are still operating at less than half-capacity, and for the first time since 1993, the balance of companies are expecting to shed labour. As Sir Brian Hill phrased it in his letter this week to the Chancellor Kenneth Clarke: 'The industry is delicately balanced between further slow growth and the serious risk of recovery juddering to a halt.'

The most worrying figure in the BEC survey of new enquiry levels suggests it will be the latter of these two unappetising scenarios. Nearly one-third of BEC firms report a declining level of new enquiries across all sectors of industry and in most regions. 'Most disappointing are the reductions in enquiries for the private industrial and commercial sectors, which were previously displaying signs of increased capital investment,' notes the BEC.

This downward trend looks likely to be mirrored in the FCEC's next state of trade survey, due out shortly. Civil engineering invitations to tender have dipped badly since the last survey. Hardly surprising since the Chancellor's cutbacks in local authority spend and national roadworks, plus industrial sector hesitation, but no less worrying.

Taken together, these downturns cast a sickly light over construction forecasters' recent toils. This year's output forecasts of between 1-2% are probably still achievable, as a pretty large percentage of 1995's output is already in the pipeline from placed orders. What is jeopardised are the prospects for 1996, which have yet to be revised downwards from their December predictions of a modest 2% output. Unless something dramatic happens to restore general investor confidence, this looks unachievable.

With rate rise speculation mounting daily, investment plans everywhere are inevitably under threat. As Britain's economy strengthens - thanks to an export-led recovery which offers nothing to construction - interest rates will inevitably rise at some stage. This can only do further damage to the industry's prospects. It is hard to know what will emerge to boost them.