New orders fall at fastest rate for 24 years

Grant Prior 11 years ago

Shocking new construction orders figures released today by the Office for National Statistics created even more confusion about the real state of the industry.

Reuters said the official figures show the biggest fall in new orders since 1987 during the first quarter of the year with a 23% drop on the previous three months and an 18% decline on the same period last year.

The numbers were even worse in the civil engineering sector with infrastructure orders down a staggering 48%.

But the ONS data will again call into question the accuracy of the Government’s numbers after the latest construction purchasing managers survey yesterday painted a much healthier picture of the industry.

Civil Engineering Contractors Association director of external affairs Alasdair Reisner said: “The ONS figures show that the orders needed to drive growth are drying up, putting the industry at real risk of further decline.”

Simon Rubinsohn, RICS Chief Economist, said: “Official figures for new construction orders received during the first quarter of the year paint a disturbing picture for the outlook for the sector.

“The volumes of orders received was the lowest since the first quarter of 2009 and, though the public sector was responsible for much of the decline compared with the final three months of last year, the private sector also produced disappointing results.

“To some extent this can be blamed on the volatile nature of the sector; the three quarter rolling average of new orders has been broadly flat since the middle of 2010.

“But after the more upbeat tone to sentiment as reflected in the latest RICS survey of the sector, today’s numbers provide a timely warning that the backdrop for the construction industry remains challenging as public spending cuts bite, the private sector only recovering in some areas and development finance still restricted.”

Noble Francis, Economics Director of the Construction Products Association said: “The fall in orders for this quarter follows a 26 per cent increase from the previous quarter at the end of 2010.  These two figures show that quarter on quarter the situation is very volatile.

“To achieve a more accurate picture of the longer trend it is better to look at the orders over the last 12 months and compare these with the previous 12 months. Over this period orders were 7 per cent down with significant falls in the public housing, education and health and infrastructure sectors, only partially offset by rises in private housing, commercial offices and retail sectors.

“Looking at orders in the latest 12 months compared to the previous 12 months, public housing orders were 8 per cent lower, education and health orders were 18% lower and infrastructure orders were 32 per cent lower.

“This indicates the start of the public sector spending cuts that we had anticipated since the Comprehensive Spending Review and we would expect this fall in orders  to feed through into construction output from the second half of the year.

“On the plus side, private housing orders during the last 12 months were 45 per cent higher than during the previous 12 months. Commercial offices, retail and leisure orders were 6 per cent higher over the same period. Both of which indicate a continued recovery in private sector construction.

“However, the sharp nature of the public sector spending cuts appear as though they will outweigh private sector recovery in the short term and, as a consequence, we forecast that construction output will fall in 2011 and 2012, by 1 per cent and 2 per cent respectively, before private sector recovery starts to drive growth in the construction industry as a whole.”

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