UK construction at lowest point since 2009

By Sandy Guthrie10 August 2012

A 9.5% fall in the UK's total volume of construction output during the second quarter of this year, compared to the same period last year, is partially being blamed on unseasonal weather and changes to public holidays.

Meanwhile, it is being claimed that recent estimates of second quarter output were too negative, although the UK's gloomy outlook was backed up by the UK's Construction Products Association, which said, "There is growing concern that long-term damage is now being inflicted upon the industry, which has for sometime been predicting this decline and yet is recognised by government as an essential part of our economic recovery."

The latest figures from the UK's Office for National Statistics (ONS) show a drop of 3.9% for the second quarter over the first three months of 2012, and the decline of 9.5% over 2011's second quarter.

The UK's late May public holiday was moved forward by one week this year, and an extra day added to mark the Queen's Diamond Jubilee celebrations. This, and the unseasonable weather, were described by the ONS as being "likely contributing factors to the decline in the second quarter of 2012".

The ONS found that the volume of all new work fell by 4.6%, and repair and maintenance fell by 2.7% compared with the first quarter of 2012. The volume of all new work fell by 12.8% compared with the same quarter in 2011, while repair and maintenance fell by 2.8%.

In fact, there were widespread falls in the volume of construction output in the second quarter of 2012 when compared with the first quarter of 2012. The ONS said there were falls in eight of the nine sectors, with the largest decrease in new infrastructure, which fell by 8.6%.

Simon Rubinsohn, Royal Institution of Chartered Surveyors (RICS) chief economist, said that construction output had fallen in each of the last four quarters, dragging the total volume of work down to its lowest point since the fourth quarter of 2009.

He added, though, that detailed construction data for the second quarter suggested that the initial estimate of output in the sector published in July as part of the GDP number in July had been too negative.

"However, the revision needs to be kept in perspective as it still shows a drop in output of 3.9% in the latest three-month period."

He said, "The fact that construction output is now barely above the low point for the cycle demonstrates the on-going crisis in the sector. The squeeze in public spending is being compounded by a worsening picture in the private sector with business confidence fragile and development finance in short supply."

He added that government measures to support the sector had so far delivered little. "It remains to be seen whether the latest guarantee scheme for stalled projects will be any more successful," he said.

'Hard to find anyting positive'

Noble Francis, economics director at the Construction Products Association, said that looking at the ONS figures, it was hard to find anything positive to say in any part of construction.

"Across the 12 different construction indices, only one, non-housing repair and maintenance, shows any growth at all and that at just 0.8% year-on-year and 0.1% quarter-on-quarter," he pointed out.

"However, what is most concerning is that private sector activity has also fallen sharply, implying that not just activity but also confidence is sadly lacking.

"This situation is rapidly becoming a crisis, and at this rate I wouldn't be surprised if manufacturers begin to shut down their operations and lay people off."

Mr Francis said, "There is an urgent need for government to address this situation by immediately embarking on a programme of repair and maintenance across all areas of the country, especially for housing and roads, clarifying the model by which private finance will be attracted to enable investment in major infrastructure projects and deciding government priorities for the amount of capital investment the country needs to stimulate growth.

"Without these measures recovery is unlikely to happen anytime soon," he said.

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