Overall, the economy grew 0.5% in the first quarter, the Office of National Statistics has reported, but the decline in construction, which traditionally accounts for approximately 10% of GDP, prevented more solid growth.
The Civil Engineering Contractors Association (CECA) said that “the weakness in the construction sector cannot be ignored by policymakers, as it will continue to act as a serious drag on overall GDP figures until a full recovery is established”.
CECA director of external affairs Alasdair Reisner said: “While any GDP growth is clearly welcome following the previous quarter’s dire figures, the fact that construction remains a major brake on a full economic recovery should serve to worry those tempted to think a recovery is now entrenched.
“Until a resolution can be found to the construction sector’s continuing weakness, the sector may well be preventing the recovery from becoming sustainable.
“With government finances tight, only private sector investment can help deliver a recovery in the construction sector, and at present their actions speak louder than words. At the moment there is not enough confidence in the UK’s economic recovery to justify the risk of new projects. While GDP is up for now, there seems to be insufficient belief it will stay that way. Only by creating the conditions to encourage greater investment in construction and infrastructure from the private sector can the government help to create a self-sustaining economic recovery.”
Mr Reisner concluded: “While we welcome much of the government’s recent work on construction, in the Budget and through the work of Infrastructure UK, these figures demonstrate that this is no time for government to take their foot off the gas.
Reforms need to move quickly from proposal to action if the construction sector at large is to begin contributing to the economic recovery, rather than slowing it down.”
Federation of Master Builders (FMB) director of external affairs Brian Berry said: “Unfortunately, today’s figures do not come as any surprise to the FMB as the SME construction sector is now in its fourth year of falling workloads with little hope of recovery in the immediate future. If the Government is serious about creating new jobs in the private sector it will have to do more to reverse the worrying decline in construction. This is the sharpest decline in construction activity since the first quarter of 2009, which is bad news for the government’s growth agenda.”
Mr Berry continued: “House building is still at an all time low. Last year 102,000 new homes were built, which is fewer than half the number required to meet the demand from household growth. The need to retrofit our existing building stock to meet the UK’s carbon reduction targets offers some hope in the near future but unless the proposed Green Deal initiative is underpinned by a range of fiscal measures such as a cut in the rate of VAT and council tax reductions it is very unlikely that this will actually translate into more construction jobs.
“The Government needs to recognise that every £1 spent on construction generates £2.84 in total economic activity. It’s a false economy not to invest in our future and create the conditions for growth because without a vibrant construction industry the UK won’t have the infrastructure that it needs to compete in a global economy.”
National Federation of Builders’ chief executive Julia Evans said: “The industry has traditionally relied on the public sector for around 40 per cent of its work. Public money is now in short supply. Government measures such as FirstBuy Direct for first-time buyers and Build Now, Pay Later for housebuilders only tinker around the edges of the problem of access to finance. Until this fundamental issue is addressed, there is little prospect of a housing market recovery or of the private sector helping to build us out of this slump.”
However, Construction Products Association chief executive Michael Ankers voiced surprise at the official statistics. He said: “The scale of this fall in the official figures is extremely surprising and is not consistent with information from construction industry surveys or the experience of the companies and sectors that the association represents. The indications are that the construction industry performed better in the first three months than the ONS figures suggest. The industry was helped partly by an element of ‘bounce back’ from the last few weeks of 2010 when the extreme weather severely curtailed construction activity in many parts of the country, and also by the exceptionally mild and dry weather throughout the whole of the first quarter of the year.
“‘Looking forward, however, the outlook remains very uncertain. The real challenge for the industry is the effect of the public spending cuts in the Comprehensive Spending Review which only really started to have an impact from the beginning of the new financial year in April, and in the short term we do not believe that construction spending in the private sector will be sufficiently strong to compensate for these cuts. As a result, the association’s latest construction forecasts, published in mid April and put together by representatives from across the construction industry, anticipate a fall in output of 1% this year compared with 2010 and a further 2% fall in 2012. We are not anticipating a return to growth until 2013, and inevitably this will be a constraint on recovery in the wider economy as construction accounts for nearly 10% of GDP.”
Scottish Building Federation chief executive Michael Levack said: “The new figures demonstrate the challenges the industry continues to face as we move into a new financial year – and a Scottish budget year where public capital investment will be cut by 21% or £686m. More effort is still required to foster recovery in the private sector to offset the substantial cuts in public investment the industry now faces.”
Got a story? Email news@theconstructionindex.co.uk
.gif)
