Construction fall sparks UK recession

26 April 2012

A drop in UK construction figures has, to some extent at least, dragged the UK economy into a recession again, and further construction falls are expected in the short term.

A recession is generally defined as a decline in GDP (gross domestic product) for two consecutive quarters, and this is the first double-dip recession in the UK since 1975.

Figures from the UK government's main survey organisation, the Office for National Statistics (ONS), for GDP in the first quarter of 2012 show that the UK economy fell 0.2% and construction industry declined by 3% - figures which caught some commentators by surprise. Others feel that the UK economy is merely bumping along the bottom. Construction is responsible for around 7% of the UK economy.

When it released the UK construction output figures for February this year, the ONS said that comparing the three months from December 2011 to February 2012 with that of the same three-month period a year earlier, the volume of construction output rose by 0.2%. New work fell by 0.5% but repair and maintenance grew by 1.4%.

However, commenting on the latest figures released this week, Noble Francis, the UK's Construction Products Association economics director said, "Given the sharp effects of public sector spending cuts over the past 12 months, it is unsurprising to see that construction returned to recession in the first quarter with a fall of 3% following the 0.2% fall in the fourth quarter."

He added, "Furthermore, with new orders for construction falling 14% in 2011, the industry is likely to endure further falls near-term."

The Construction Products Association's latest forecasts for construction predict that the industry will fall considerably this year and remain flat in 2013, "severely delaying recovery for the economy as a whole".

Mr Francis said, "Given that independent economic analysis has shown clearly that for every pound spent in construction, £2.84 is generated for the wider economy, it is essential that government does its utmost to switch its current spending towards the more productive capital spending."

Mike Leonard, director of the Modern Masonry Alliance, said: "This double dip is hugely damaging. We have repeatedly warned that a failure to drive the construction of new homes, RMI (repair, maintenance and improvement) and infrastructure would result in a lack of growth and rising unemployment."

Mr Leonard said, "The requirement to cut overall public spending must be matched by a strategy for sustainable growth."

He called for a programme to build 25,000 additional social homes over the next 18 months.

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