CONSTRUCTION group Morgan Sindall warned today that trading for 2012 will be “slightly below” previous expectations in a trading update today.

It said difficult economic conditions have taken their toll as the UK construction market continues to face further reductions in public spending, deferred investment decisions and high levels of competition.

In response to these conditions the group said it continues to be “highly selective” when bidding for new work and has undertaken a reorganisation of operations to deliver the right level of resources to current workload which will result in a one-off £10m cost.

It said construction and infrastructure is continuing to perform in line with its expectations. The group earlier this year secured an £8m contract as part of the refurbishment of the Merseytravel underground stations.

The group said itsaffordable housing division’s response maintenance market remains robust and has secured £115m of opportunities in the second half of the year.

However, as expected, the new-build social housing market has been hit particularly hard this year as funding issues remain, leading to a significant fall in new projects.

There has been no major change in the outlook for the group’s fit-out division and the urban regeneration arm remains stable.

The group said today: “Our underlying trading for the current year is expected to be slightly below the board’s previous expectations, although the group will benefit from the £7m gain made on the sale of our medical property investments this year.

“This gain will in part offset the £10m restructuring charge that will be incurred this year.

“While we are cautious over the outlook for the group in 2013, the medium-term prospects for the group are improving with our increasing emphasis on regeneration, infrastructure and major long-term frameworks.”