On Friday the Office for National Statistics published figures that showed gross domestic product (GDP) was down 0.3% in the final quarter of 2012 compared to the previous quarter and was flat compared to the same quarter of 2011. Main contributors to this fall were manufacturing and mining & quarrying sectors, which fell 1.5% and 10.2% respectively.
Construction overall fared slightly better, growing by 0.3% quarter on quarter, but down 11% year-on-year.
Noble Francis, economics director at the Construction Products Association, said: recent figures for new orders, down 7% year-on-year, suggest further difficulties ahead for construction.
The Civil Engineering Contractors Association (CECA) said that the fall in GDP for the fourth quarter of 2012 may dent confidence in the construction sector, despite a small rise in the industry’s output.
CECA director of external affairs Alasdair Reisner said: “While there has been a modicum of growth in the construction sector, the overall drop in GDP places the British economy on a knife-edge. Historically, negative growth in the economy dents investor confidence. Yet there are some investors that we will need to attract if we are to maintain and upgrade our national infrastructure.
“It is vitally important that the government continues efforts to free up investment in Britain’s infrastructure sector. A failure to do so will put our sector at risk of further declines, with a corresponding negative effect on the wider economy.”
Ministers must find more ways to stimulate construction to boost economic growth and tackle the housing crisis, the Federation of Master Builders (FMB) said.
FMB chief executive Brian Berry said: “Our members are ready to help Britain build its way back to growth, in the process helping meet the spiralling housing crisis and improving energy efficiency in homes and businesses. But we can’t do this alone. Government must meet construction firms halfway, and find imaginative new ways of increasing activity in the sector, particularly for small, local builders who may not immediately benefit from major infrastructure investment.”
He continued: “For example, the Treasury could incentivise domestic energy-efficiency improvements with a reduction in VAT on such work to 5% – home owners would then be more likely to improve insulation, fit high-performance glazing and more efficient boilers.
“Ministers and local authorities must also urgently look at bringing new housing online, by freeing up additional land for development and refurbishing empty or derelict stock. Easing planning red tape and pushing investment through the new Business Bank will help smaller construction companies begin to start providing the 250,000 new homes Britain needs every year to just to keep pace with demand.”
National Federation of Builders chief executive Julia Evans said: “Since the downturn in late-2008, the NFB has consistently called for targeted capital spending as a means of ensuring economic growth. Only now is the government making sustained efforts to invest in construction, remove barriers to development and even admitting that swinging cuts to capital spending were misguided.
“While the government is now investing in infrastructure, the nature of construction with its long project lead times means that the positive effects of infrastructure investment will not be felt for some time and will not directly benefit the SMEs that the government recognises will drive growth but are not benefitting from government and bank funding to the extent needed for a recovery. Smaller projects and house building, especially projects carried out by lower volume house builders would provide a near-term boost that would also be sustainable.”
Steve Murphy, general secretary of construction union Ucatt, said: “The government needs to realise the damage their economic policies are causing. In recent months we have seen a series of long standing regional construction firms being forced into administration. Rather than cutting construction spending the government should be urgently investing in housing and infrastructure projects.”
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