Builders' view of prospects falls to 4 1/2-year low

Building firms are more pessimistic about the general business outlook than they have been for 4 1/2 years.

The Institute of Economic Research's March survey of business opinion found that, compared with three months ago, fewer building firms expect to expand output in the next three months.

Architects' responses also suggest a slowing of building activity. While a small net balance expect an increase in their workload over the next 12 months, for the following year their balance of expectations is for a reduction in work.

As many builders to expect their profitability to decline as to expand over the next three months.

A net 40 per cent of builders reported higher costs over the last three months - the highest level since 1987. "Similarly, intentions to increase selling prices have not been so widespread since the March quarter 1987," the institute said.

Skilled labour remains in desperately short supply, with 61 per cent of construction firms identifying labour as the single factor most limiting their ability to increase turnover.

Despite that, the number of firms intending to increase staff numbers has fallen sharply. "Either there isn't going to be the work or they don't think they will be able to recruit at present wage levels . . ," said institute economist Grant Andrews.