Construction Industry Is Still in Good Shape, despite Tales of Woe; the Bigger Picture the Past Month Has Been One of the Hardest Times for Construction Firms in Recent Memory. Tom Scotney Looks at Pressures Hitting the Industry

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Byline: Tom Scotney

The headlines will have made grim reading for anyone involved in construction in recent weeks.

At the start of the month, the group behind the development of Arena Central - which includes the V Building, one of the most recognisable points of Birmingham's proposed new skyline - went to Birmingham City Council to ask permission to make a pounds 5 million planning-gain payment for improved public transport in phases rather than up-front in a lump sum.

Arena Central Developments said cash-Low difficulties meant they did not want to hand over all of the money as soon as work on the pounds 500 million development begins.

The council planning committee agreed.

And the delay was just the latest of many high profile problems to hit the construction industry, coming just days after the collapse of Chase Norton Construction.

In what was a major blow to the economic confidence of the whole region, what was once a pounds 40 million business working on some of Birmingham's most high-profile projects had to call in the administrators because of a crippling cash shortage. The company that had managed the pounds 15 million mixed-use development to the south of the Mailbox simply did not have the money to complete the contracts it had signed.

Chairman Rod Ackrill, the president of Birmingham Chamber of Commerce, had to defy doctors' orders and go into the offence to deal with the collapsing finances of the stricken firm.

More than 100 workers were axed from the company's head offence in Warwickshire, with just a skeleton staff kept on to assess the future of its now moribund outstanding contracts. And customers scrabbled to find new companies to take on work as diverse as a school in Worcestershire and a church in Handsworth.

The collapse of long-established parts of the Chase group sent shockwaves through a business community already reeling from regular tales of woe from the "credit crunch".

And Chase was far from the only construction company to be affected. Taylor Wimpey, the UK's biggest housebuilder, axed 900 British jobs at the end of last week, with speculation that many would be lost from regional centres in Leicester and Wolverhampton. Barratt Developments cut 50 jobs in its Halesowen branch. Persimmon said 280 jobs would be going.

There were estimates that the construction industry lost 5,000 jobs across the UK in just one week at the start of the month.

So what went wrong?

Despite the need for new housing - shown by the Government's desperate attempts to build the muchmooted "eco-towns", the number of houses being built continues to drop. The construction industry in the UK took a knock between May and June and took a big knock after house-building reached its lowest point since the Purchasing Managers' Index started recording figures in 1997.

The latest RICS survey showed housebuilding in the West Midlands declined at their fastest pace in almost 13 years as the effects of the credit crunch deepen within the UK economy.

In the West Midlands workloads in this sector fell at the fastest pace in the survey history as house builders, reacting to the market downturn and the credit crunch, have had no option but to severely limit output, putting the Government target of building three million new homes by 2020 even further out of reach.

Howard Archer, an economist at the Global Insight consultancy, blames the collapse in construction activity on the housing market, saying: "House-builders are being hit extremely hard as housing market activity and house prices crumble in the face of elevated affordability pressures and very tight lending conditions. …