Contractors worry about 2010 public spending black hole

Contractors are bracing themselves for a funding black hole in 2010 as public sector cash dries-up and private money looks doubtful to fill the void.

A string of construction companies have issued gloomy predictions about prospects next year.

May Gurney and Severfield Rowen both warned about a tough 2010 last week. And Contract Journal understands that Laing O'Rourke directors have recently been briefed by chief executive Tony Douglas about challenging conditions next year.

• Analysis: will public money dry up?

An O'Rourke source said: "The simple problem is funding. Politicians talk about freeing up the banking system but that's not happening on the ground because private developers can't raise cash.

"That shows no sign of easing and it seems certain that public spending will be slashed even if Labour somehow clings on to power. If the Tories get in then cuts are guaranteed.

"That is the nightmare scenario for the whole industry if the taps are turned off on public spending and the private market is not ready to jump in and fill the gap."

May Gurney chief executive Philip Fellowes-Prynne is already speeding up plans to scale back traditional civil engineering operations as the firm braces itself for a downturn in public sector spending.

He said: "It is obvious to us that post the election, there will be a new administration coming in, and that new administration will try and start from a clean sheet.

"We believe that public spending will be curtailed principally in the capital area. If you listen to the statements by the Conservatives, they are saying we have had 20 years of investment in schools, hospitals, libraries, etc and we should maintain them while we take a deep breath and get our finances sorted out."

Kier south east construction director Peter Searle said: "Public spending looks certain to fall and the real horror will be if private spending doesn't fill the void.

"That will mean there's real danger of a double-dip recession which will be horrendous for the industry."

The UK's largest constructional steelwork contractor, Severfield-Rowen, has also warned that 2010 trading is set to be even tougher than this year.

Tom Haughey, chief executive officer, warned that the construction market in the UK was fading to levels below that forecast by the industry in recent months.

He said: "We are now experiencing a significant decline in demand in the company's key UK construction sectors and as a result we will implement further cost reductions and reconfigure capacity."

One industry expert said: "You talk to people and everyone is singing the same song - next year is going to be brutal.

"There's a total work black hole. I've been speaking to firms that haven't got a new job on their books for after next easter. Public spending will be shredded then and there's no way private cash will be riding to the rescue in time.

"The only hope is that that gap doesn't last too long."