The total volume of all new construction orders in the second quarter of 2012 is estimated to have increased by 0.2% compared with the first quarter of 2012.
New orders remain 40% lower than the pre-recession peak.
Construction Products Association economics director Noble Francis commented: “The adverse effects of the public sector cuts are clearly highlighted in these ONS figures. New orders for public housing in the first half of the year were 24% lower than a year earlier and orders for public non-housing, which covers education and health, were 19% lower than a year earlier.”
There was some difference in interpretation about the infrastructure numbers. The Civil Engineering Contractors Association (CECA) pointed to a 20.4% drop in new infrastructure orders in the second quarter, while the Construction Products Association prefer to focus on their strong increase in the first half.
Noble Francis said: “The picture is brighter for infrastructure, where new orders in the first half of the year were 47% higher than a year earlier and this will feed through over the next few years through large projects such as Crossrail and Thameslink. However, this is not enough to offset the fall in orders in the public sector. In the private sector, new orders for commercial construction rose 1% in the first half of the year, which points towards a subsequent rise in output in 12-18 months’ time, given the long lead time in the commercial sector.
“With new orders at such historic lows, it is imperative that government does more to stimulate construction and the economy. Despite numerous announcements and initiatives from government over the past 12 months, the private sector recovery remains sluggish, as public sector investment falls sharply. The economic recovery will only return when investment is made, therefore government must decide its priority between its current and capital spending whilst at the same time provide a robust model to attract private finance.”
CECA director of external affairs Alasdair Reisner said: “It is worrying that infrastructure orders have fallen steeply for the second consecutive quarter. This reverses much of the gains made during a mini-recovery for the sector last year, and throws into doubt the chances that new infrastructure will be able to support growth in the wider economy.
Steve McGuckin, UK managing director of construction consultant Turner & Townsend, said: "The headline number is positive, but the good news is thin. Total new orders are creeping up, both on the quarter and over the same time last year. Most of the quarter to quarter growth is being delivered by the public sector. While the extra work is good for the construction industry, it isn't a sign of growth or confidence in the economy as a whole.
"Private sector and infrastructure construction provide a much better barometer of the nation's economic health. And the outlook there is challenging. Private industrial and commercial orders are both down, and infrastructure orders have dropped by more than a quarter in six months.
"Private housing orders are up a touch but have only returned to last year's levels. The government is hoping that by easing planning restrictions it can inject extra life to the sector, but the real reason it is so sluggish is affordability and the lack of mortgages at higher LTVs.
"But there's no hiding that across most of the private sector, orders are down - and this is placing huge pressure on the construction industry.
"The pressure is causing a split between the 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 to breaking point by ever-greater competition.
"The increase in new orders has to be welcome, but the fact that the growth is primarily coming from the public sector means it may not last."
EC Harris head of strategic research & insight Simon Rawlinson was a little less pessimistic. He said: “Q2 New Orders suggest that there will be greater stability in activity levels as we move into 2013, but we are by no means out of the woods. The contribution of the public sector to maintaining volumes of activity is not sustainable, and the continuing dour performance of the commercial sector, including PFI must be a cause for concern. The data could have been a lot worse, but does not yet point to growth”.
“The most eye-catching statistic is perhaps also the most misleading for whilst New Orders are up by 11% compared to the same time last year, this rise is more to do with the fact that orders fell by an unprecedented 16% in Q2 2011”
“Looking beyond the headlines there are a few welcome trends as well as causes for caution. Private Housing orders increased by 10% in Q2, recovering to typical levels seen in 2011. Welcome news but clearly the stimulus measures announced this week can’t come soon enough.
“Infrastructure - after two quarters where large orders in rail and water have boosted volumes by £700m to £800m, more normal levels of business have returned. Infrastructure spending is typically very lumpy, so no surprise there however without sustained infrastructure spending, continuing volumes of work may be difficult to maintain.
“Public sector - a 30% increase on the quarter and the highest volume of orders since Q1 2011. The data points to this spend being focused mainly on education, with most growth taking place north of the border. This could be a one-off spend that has insulated the industry from slow-downs elsewhere. However, with delayed procurement for the Education Funding Agency and Defence Infrastructure Organisation in the pipeline, we may see more of this backlog procurement coming through in the next 2-3 quarters.”
He added that the lacklustre performance of the commercial and industrial sectors, by contrast, “confirm the widely held view that an enterprise driven recovery remains elusive”.
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