New figures from the Office of National Statistics today put the estimated total volume of construction output in the fourth quarter of 2012 at 0.9% higher than the third quarter of 2012 - the first quarterly increase since mid 2011.
But year-on-year, output was down 9.3% compared with the same quarter of 2011. The estimated volume of all new work fell by 11.6% in the fourth quarter compared with Q4 2011, while repair and maintenance fell by 4.7%.
The private housing and infrastructure sectors provided the greatest contribution to the quarter-on-quarter increase, growing by 5.9% and 4.2% respectively. New public non-housing work and private housing repair and maintenance fell by 4.9% and 4.8% respectively.
The ONS said that non-seasonally adjusted output for Q4 2012 “showed a somewhat different pattern to previous years”. Although December usually shows a large fall compared with November, in 2012 the fall was bigger. In addition, output fell between September and October in the two previous years but rose by 8.8% this year. Finally output rose between October and November in the previous two years but fell by 3.1% this year.
The Civil Engineering Contractors Association (CECA) said that the sector continues to face challenging trading conditions despite the return to growth. Director of external affairs Alasdair Reisner said: “Today’s figures show a welcome increase in output, both in the infrastructure sector and across the wider industry, and mirror CECA’s own findings of our members’ current workloads.
“However, it must be recognised that such growth as there is in the industry remains fragile. Positive figures in the infrastructure sector mask significant falls in activity in other areas.
“CECA is working closely with government to identify new opportunities to boost activity in the sector on behalf of our members, and hope this work will continue to bear fruit in boosting output in the future, for the benefit of the wider economy.”
EC Harris head of strategic research Simon Rawlinson pointed out that the data revealed an 11.5% decline on new build activity for the year.
He said: “Today’s Construction Output release from the ONS confirms that seasonally volumes of work declined by 8.4% in 2012, undoing most of the recovery seen prior to mid-2011. Repair and maintenance grew by 2.2% during the year, so activity levels in the crucial new build sector actually fell by 11.5% - a devastating contraction for the construction industry. Pain has been felt across the board, with double digit declines in the infrastructure and commercial sectors as well as the expected contraction in publicly funded work. The only sector to grow was Industrial – by only 0.5%, well within the range of statistical error. The extent and duration of the synchronised contraction of work across all sectors is particularly damaging for the industry, potentially affecting long-term capacity for large and small projects alike.
“Some comfort can be taken from Q4 2012 data which shows that volumes began to increase during the final quarter – the first increase since the middle of 2011. Overall, new build grew by 1.6. Importantly, growth occurred in all sectors other than public sector housing and non-housing and in the case of private housing and infrastructure, was quite robust at 5.9% and 4.2% respectively. The housing data will definitely be worth following closely over the next few months.
“Third quarter 2012 new orders increased by 5% from a very low base but the recent CIPS survey data has been very weak indeed. The slight recovery of activity in the 4th quarter may prove to be short lived.
“If you compare the 2012 data with 2007, just before the recession, it shows how much the industry has changed shape: private housebuilding has shrunk by 35%, and the commercial sector by over 30%. By contrast, infrastructure has grown by over 50% in real terms. When recovery does come in the private sector, resource may prove to be more scarce than expected.”
Turner & Townsend managing director Steve McGuckin said: "Any growth is welcome, but these numbers fall far short of reversing the big drop seen in the third quarter.”
He added: "After such a long period of contraction, the industry is changing. As the big players are being forced to pitch for smaller projects, those in the "squeezed middle" are having to slash margins to negligible levels - and in the most extreme cases, some firms are pitching for work at below cost, simply to keep cash-flow coming in.
"Such desperate measures are clearly unsustainable, and the industry as a whole is having to adapt to a tough environment which is by no means over. The industry may be able to console itself with the thought that the worst is over. But after falling so far, it has a long way to go to get back on its feet."
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