Private work falls drag output down by 9.5%

Grant Prior 10 years ago
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The total volume of construction output fell 9.5% during the second quarter of 2012 compared to the same period last year.

The dramatic drop came as private sector work started to mirror the downward trend of public sector spending and output for the three months fell to £24.4bn.

The Office for National Statistics said: “Over recent periods, public sector output has been decreasing while private sector output has remained relatively flat.

“However, the decrease in this quarter is more evenly spread, with falls in private housing output for both new work and repair and maintenance and also falls in new private commercial and industrial work.”

Over the year, the largest falls in new work were seen in public housing (25%), infrastructure (24.8%) and other public non-housing (21.2%).

Repair and maintenance output fell by 2.8% over the same period, with a drop of 8.5% in repair and maintenance for private housing and a fall of 3.9% for public housing.

This was slightly offset by non housing repair and maintenance, which grew by 0.8%.

The largest fall was in infrastructure (8.6%), while private commercial – the biggest sector – showed the smallest fall, decreasing by 0.6%.

Noble Francis, Construction Products Association Economics Director said:  “Looking at these figures, it is very 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.

“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.

“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.”

Steve McGuckin, managing director of the construction and programme management consultancy Turner & Townsend, said: “All the sunshine and Olympic feelgood factor in the world can’t hide the fact that these are black days for the construction sector.

“Stagnation has moved from the stuff of nightmares to the new norm.

“Despite Sir Mervyn King’s assertion this week that the economy is ‘slowly healing’ – construction is still walking wounded.

“Output in the last quarter tumbled to levels not seen since the depths of the 2009 recession. The big drop in infrastructure output is of particular concern for the economy as a whole.

“Many in the industry had hoped that if they could just limp through 2012, next year would be better. But with the sector continuing to contract, the optimists are being forced into a drastic rethink.

“The pressure is causing a schism between the sector’s limited number of big players who have a strong balance sheet and the capability to deliver the big projects, and the small and medium-sized firms who are being squeezed by ever-greater competition.

“As a result those in the middle ground 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 still showing scant signs of improving.”

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