2011 ‘best forgotten’

10 February 2012

The year 2011 is being described as ending with "a whimper rather than a bang", and as "a year best forgotten" for many in the industry, following the release of construction industry output figures today from the UK government's Office for National Statistics (ONS).

The headline figures - at constant (2005) prices, seasonally adjusted ­- show that the total volume of UK construction output in the fourth quarter of 2011 fell slightly by 0.5% compared with the third quarter of 2011.

There was some growth recorded. The total volume of construction output in the fourth quarter of 2011 grew by 0.9% compared with the same quarter in 2010, and in comparison with 2010, the total volume of construction output in the whole of 2011 grew by 2.8%.

In the fourth quarter of 2011, all new work fell by 0.6%, and repair and maintenance fell by 0.3% compared with the third quarter of 2011, according to the ONS. All new work grew by 1.4% while repair and maintenance remained largely unchanged compared with the fourth quarter of 2010.

The news that construction output fell by 0.5% in the last quarter of 2011 has led the UK's Construction Products Association to remain pessimistic about the medium-term prospects for the industry.

Noble Francis, economics director at the Construction Products Association, said, "The trend in construction output is clearly still downwards at a time when government acknowledges that construction is one of the sectors necessary to help the economy avoid slipping back into recession."

He said that overall, these figures only serve to reinforce the Association's concerns about the prospects for the industry over the next 18 months.

"The Association's latest forecasts," he said, "suggest that construction output will fall by more than 5% during 2012 and there will be no significant recovery in the industry until 2014. This year will see a dramatic 14% fall in public sector construction as spending cuts begin to bite."

He added, "The real concern, however, is that private sector construction is not recovering fast enough to offset this and will fall further during 2012, with the private commercial sector 5% lower than this year. With forecasts by the Ernst & Young Item Club this week suggesting that bank lending is likely to fall over the next 12 months, this will only exacerbate the problems for the construction industry and the economy as a whole."

Andrew Duncan, managing director of property at consultants Turner & Townsend, said, "These figures confirm what the sector had suspected - that 2011 ended with a whimper rather than a bang.

"For many in the industry, 2011 was a year best forgotten, with nearly stagnant growth and wafer thin confidence. While the run-up to Christmas is often a subdued time in the industry, these meagre fourth quarter figures cannot be put down to seasonality alone. Rather, they attest to the continued lack of sector confidence and lingering macro-economic concerns about the fate of the Eurozone."

He said, "Such doubts were a constant drag on growth throughout 2011, but early indications for 2012 are much more encouraging. We've seen a measurable improvement since the start of the year, with more work coming down the pipeline and improving market sentiment."

Earlier this week, industry commentators were expressing doubts about prospects for the sector in 2012, despite a rise in January's UK construction purchasing managers' index (PMI) and figures showing that fewer contractors had slipped into insolvency in the fourth quarter of last year.

January data signalled a 13th successive monthly rise in UK construction sector output, but the rate of growth had eased month-on-month, reflecting a slowdown in new orders.

Mr Duncan said then that the modest rise in the UK's construction PMI looked more disappointing when set against the fact that January was traditionally an upbeat month for the construction sector.

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