It's official - we're in decline again

It was construction’s largest fall since the height of the recession in early 2009.

Estimates from the Office for National Statistics show that the 3.3% decline in construction output, all but cancelling out the 3.9% rise in the third quarter, had a major impact on the overall economy.

Civil Engineering Contractors Association director of external affairs Alasdair Reisner said that the Gross Domestic Product figures “should act as a wake-up call, providing a stark reminder of the critical role that construction plays in the UK economy. It is clear that a downturn in activity in the industry has an impact that is felt far beyond the site fence, acting as a brake on the country’s ambitions to return to growth.”

He added: “While there have clearly been seasonal factors that have played a role in the reduction in construction output last quarter, the results also reflect a continuing negative outlook that has been reported by companies from across the industry.

“Sadly there seems to be little in the way of confidence that there will be a turnaround in the industry’s prospects in 2011, and with the full effect of public sector cuts yet to feed through, there may very well be further bad news to come in future quarters.”

Construction Products Association chief executive, Michael Ankers said: “After two quarters of relatively strong growth in the middle of 2010, these latest figures show that the economic recovery has stalled even before the full impact of the public sector spending cuts is felt. Although the poor weather in the last few weeks of the year undoubtedly had an impact on the construction industry, as it did in 2009, it is clear that the recovery in the construction industry has already petered out and that private sector growth is not coming through strongly enough.”

Mr Ankers continued: “The Construction Products Association is forecasting that construction output will fall a further 2% in 2011 and this will inevitably hold back the pace of recovery in the wider economy. It is essential that the government does more to encourage a private sector led recovery by accelerating the measures it is taking to reduce the burdens on business, encouraging the banks to make more money available for viable business investment, and implementing the measures it is committed to for improvement to the infrastructure of this country. It also needs to ensure that its broader policy objectives on localism help stimulate rather than hinder economic growth.”

Construction forecasting organisation Glenigan said that the 3.3% drop in construction output during the final quarter of 2010 confirmed its own research findings, which have seen a sharp fall in the value of new projects starting on site.

Glenigan economics director Allan Wilen said: “Reduced government funding is increasingly restricting the flow of health, education and other public sector projects, whilst a sluggish housing market has hampered the recovery in private sector activity. December's severe weather conditions compounded the downturn leaving the value of underlying projects starts during the three months to December 29% down on a year earlier."

Mr Wilen added: "Near term, project starts and construction output will enjoy a temporary boost as contractors press on with work delayed by December's big freeze. Looking further ahead, we anticipate that a gradual strengthening in private sector commercial and private housing activity will help to offset the impact of further retrenchment in government funded work."
 

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