October 7th, 2008
05:01 AM GMT
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LONDON, England – To look at the skyline behind our live shot position in the city of London you could be forgiven for thinking that the credit crunch has left the construction industry unscathed. There appear to be more cranes than tall buildings on the horizon.

But a quick straw poll of contacts, friends and family working in the sector suggests that Britain's constructors are actually finding the going pretty tough. Hardly an exhaustive scientific survey I know, but I thought you'd be interested to read what they had to say.

The chief executive of a publicly listed, national builder told me recently that while he was confident his company was well placed to take advantage of any recovery, the next 18 to 24 months were going to be painful. The rising cost of raw materials had already hit the bottom line and the severe slowdown, some might say almost complete standstill in new home construction was particularly worrying. Under his stewardship the company has built enough of a cushion to weather the most severe economic downturn, but what pains him most, he told me, is the very real possibility that he will have to let go of some of his loyal, longstanding workforce if there's no light at the end of the tunnel within the next year. He also worries that the employees of long standing suppliers would face a similar fate if he was unable to continue putting orders their way.

My good friend Jonathan Rubins, a director at Stephen Howard Homes, a medium sized regional house builder says that concern over the availability of mortgages and the fact that people are worried for their jobs has led to a significant stagnation in sales to the general public. However, the rental market, he says, is enjoying considerable growth. Thus while ‘buy to let' mortgages have become more difficult to obtain for smaller investors, landlords looking to build a property portfolio are finding that mortgages are still available at good loan to value ratios and are bringing custom his way.  This, he says, is a regional phenomenon. If his company were based anywhere other that the South East, he fears his outlook would be far less positive. 

My brother in law, Jonathan helps to run Taylor and Stapleton Engineering, a medium-sized family firm specialising in heating and ventilation. The good news is that there has been no noticeable slowdown in business orders for him ... yet. He is by no means complacent. He says that the commercial sector of the industry in the south east of England is being helped along at the moment by the construction of the 2012 Olympic venues. He is braced for a slowdown if and when it arrives but is confident in the company's specialist expertise. Even if new build orders slow there should always be a market in refurbishments, which need to be completed regardless of economic circumstances. Jonathan has however noticed pressure in terms of wage demands as employees struggle to cope with the increased cost of living with food, fuel and especially utility prices rising fast.

Francis Biro is one of those rare finds - a local builder who is so good at what he does that he seldom needs to advertise his services. Word of mouth and recommendation are what brought him to our attention and that of many other local families. Francis says that while he's not short of work yet, he is concerned about the lack of new enquiries. Not long ago he was getting at least one a week and always had drawings on his desk, the next job lined up and ready to go. Now he finds himself getting to the end of one project with no new work in sight. Fortunately, he hasn't yet found himself idle but worries that it's only a matter of time before he encounters gaps between jobs.

Francis hopes that as the housing market slows and people find it harder to move home, they will instead turn to people like him to extend their current property. The problem there is of course that loans for such projects will in all probability be harder to come by and perhaps prohibitively expensive.

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soundoff (6 Responses)
  1. Umer Fahim Khan

    Hi Adrian,
    Ten minutes ago, your live comment on CNN drove me to this blog. I think you are right in saying that "Britain’s constructors are actually finding the going pretty tough". The point to be noted here is that an average 20 storey building takes somewhere between 3 to 4 years to complete, hence most of those under-construction buildings would have begun construction years before the credit crisis began.

    October 7, 2008 at 8:04 am |
  2. Correy Thomas

    I would like to leave a comment on the presidental debate that I think that barrack obama has this all the way this is my first time voteing and im going to let my voice be heard that I think that barrack obama is going to be the first black president of the united states

    October 7, 2008 at 4:34 pm |
  3. Uma in Liverpool, UK

    Dear Mr Finighan,

    There was trouble with Britain's housing markets well before the 'mortgage-meltdown'.

    You're spot-on, when you say: The problem there is of course that loans for such projects will in all probability be harder to come by and perhaps prohibitively expensive.

    Folk couldn't afford new houses, nor to fix their old houses, before All This started. The housing prices in Britain were mind-bogglingly inflated. Now, they are less inflated. All that means is the equity people had accrued is suddenly not worth what it was, and they can't put it toward a new house, because it's so little money now, even if the banks were lending.

    It's a no-win. I feel for builders, and everyone whose livings had to do with the housing-sector.

    To change the subject slightly, but not entirely, you lot have been talking about 'lack of confidence', a great deal.

    I just heard Ben Bernanke speak, and the Dow crashed over 250 points, during his speech! No confidence? Not a jot.

    What he said, which was actually very little, if one cut out all the words, in search of substance, was not confidence-inspiring! 'Things are bad. We don't know how much worse they will get. They will take a long time to get better. We have no idea how long they will take', was the substance of his speech. I'm surprised the Dow didn't fall further! Oh. I just heard it has. No confidence.

    Fasten your seat-belts; it's gonna be a bumpy [next few years]!

    Why is it worse in the UK, than it is, in the States? That's the bit I can't fathom. Could someone answer that question? I'm a bit ignorant about the UK economy... Is it just that we were already worse off? (I only moved back to England in 2006, after forty years abroad.)

    October 7, 2008 at 5:56 pm |
  4. Uma in Liverpool, UK

    Salutations Biz 360 Team! :-)

    Thank you for the great work you're all doing, along with Mr Ali Velshi, Ms Maggie Lake, and all the other folk, who are based in CNN-USA. Poor Mr Roth has had to stand about on Wall Street, through thin and thinner, for the past fortnight. I'm an old N'Yawker, and the wind can be very chilly off the Ocean, down on Wall Street. That's not only meant metaphorically!

    Did you lot know, that Business International, and all the Biz programmes, are sponsored by investment banks, and deregulated financial zones in South Korea, the UAE, and Dubai? The irony is almost, but not quite, hilarious.

    It's the sort of thing that would be funny, if it were meant to be humour. As things are, it's just ironic. :-(

    I'm holding my breath, waiting to hear what the Lord Chancellor (is he still called that, or am I just an atavism?) has to say to Parliament, before the London FTSE 100 opens, tomorrow morning. It'll come shortly after the Debate coverage is over, I reckon.


    We live in 'interesting times'. That's an ancient, Chinese curse: 'May you live in interesting times'. Times that are the most interesting to read about, are not so pleasant for those who live through them. Poor old Iceland... unbelievable. Never trust a 'bubble'.

    October 7, 2008 at 9:09 pm |
  5. Scott


    The Government has loaned AIG Billions to stay in Business and avoid takeover. Also with the news, of the possibility of Government infusing cash in banks to sure up balance sheets. Why doesn't the government take a look at the Wachovia situation. Would it not be better for the shareholders, employees, and American Public to use the above instruments to keep Wachovia Independent? Give Bob Steele a chance to rescue Wachovia and continue to give people more choice in Banking.


    October 9, 2008 at 11:52 am |
  6. eric

    why is gas under $89 a barrel and pump price $3.60 a gallon? Doing something about this would help the economy.

    October 9, 2008 at 3:13 pm |

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