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Mon June 21 2021

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Study shows cost of construction’s decline

31 May 13 New research suggests that had construction output not fallen, the UK economy would have grown three times faster.

A study by the National Institute for Economic and Social Research says that if construction output had remained level the entire economy would have grown by 1.2% over the last five economic quarters rather than the actual 0.4%.

The UK construction industry has shrunk, overall, by 10% since the government came to power, the study reveals. Construction output is now at its lowest level since 1998.

The main reason for this fall has been recent cuts to publicly-funded construction projects, which account for a fifth of total construction output, says the Trades Union Congress (TUC), which commissioned the report.

Since the 2010 general election public spending on construction has fallen by 27.3%. Public sector house-building has been cut by 20% and investment in construction of schools, hospital and transport projects by 37.8%.

TUC general secretary Frances O'Grady said: “The government's failure to support our construction industry has been terrible for jobs, growth and wages.

“This research shows what happens to the economy when you cut back on vital state funding and why we need urgent investment in new affordable housing and infrastructure projects.

“Without this stimulus the construction sector will continue to struggle and slow down our recovery.”

Construction union Ucatt general secretary Steve Murphy added: “The government’s policy of cutting construction spending is nothing short of economic vandalism. It is not only damaging the construction industry it has also been hugely detrimental to the entire economy.”

Private sector construction work has also decline – by 4.5% – since May 2010, the report says. The cuts in construction output have led to 89,000 construction job losses since the government came to power. In the last year alone, employment in the industry has fallen by 70,000. Workers who have managed to remain in employment have seen their wages fall by £3,000 in real terms since 2010.

Impact of construction industry output on growth

 

2012 Q1

2012 Q2

2012 Q3

2012 Q4

2013 Q1

Total

Production

0

-0.1

0.1

-0.3

0

-0.3

Construction

-0.4

-0.2

-0.1

0

-0.1

-0.8

Services

0.2

-0.1

0.9

-0.1

0.4

1.3

Total (Does not sum due to rounding)

-0.1

-0.4

0.9

-0.3

0.3

0.4

GDP If construction flat

0.3

-0.2

1

-0.3

0.4

1.2

Source: Office for National Statistics

Public spending on construction projects (£m)

 

New Homes

Other new work

Repair and maintenance

All Public works

All Private works

All work

2010 Q2

1,063

3,367

1,620

6,050

20,160

26,209

2010 Q3

1,175

3,464

1,607

6,246

20,714

26,961

2010 Q4

1,173

3,399

1,609

6,181

20,291

26,473

2011 Q1

1,146

3,317

1,530

5,993

20,483

26,475

2011 Q2

1,149

3,177

1,484

5,810

21,006

26,817

2011 Q3

1,086

3,068

1,460

5,614

21,220

26,835

2011 Q4

1,056

2,792

1,460

5,308

21,306

26,613

2012 Q1 (R)

949

2,590

1,483

5,022

20,249

25,273

2012 Q2 (R)

905

2,473

1,475

4,853

19,744

24,596

2012 Q3 (R)

908

2,411

1,517

4,836

19,236

24,072

2012 Q4 (R)

885

2,263

1,501

4,649

19,568

24,218

2013 Q1

849

2,094

1,453

4,396

19,244

23,639

Since election

-214

-1,273

-167

-1,654

- 916

-2,570

Since election (%)

-20.1

- 37.8

-10.3%

- 27.3

-4.5

-9.8%

Source: Office for National Statistics

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