UK Recovery Hindered By Construction Recession

Although the latest GDP figures indicate a continuation of recovery in the economy with 0.2% growth for the first quarter of 2010, the construction industry is lagging behind and will remain in recession, according to the latest construction forecasts from the Construction Products Association.  At around 9% of GDP, construction is an essential part of the UK economy and if it remains in the doldrums, recovery for the economy as a whole is likely to be slow and protracted. The Association’s forecasts highlight a fall of 3% in construction activity during 2010 following last year’s 12% fall; the industry’s worst decline in more than 35 years.  And by the end of 2010, it is anticipated the construction industry will have lost £16 billion of work in just three years. Growth is not expected to return until 2011 and even then it is forecast to be relatively subdued at just 1% per year is 2011, 2012 and 2013. It is therefore critical that public spending on schools and housing, as well as in energy and transport infrastructure, is not cut sharply, otherwise recovery for the construction industry could be delayed and economic recovery for the UK could be severely hindered. Yet, despite the pessimistic forecasts, the Association predicts work will increase in some sectors, such as private house building, where growth of 32% is expected between 2010 and 2012. In addition, construction activity is forecast to be boosted by infrastructure work in the regulated sectors of rail, water and energy. Commenting on these latest forecasts, Construction Products Association Chief Executive Michael Ankers said; ‘This is not good news for the industry or the wider economy. The construction industry is such a major part of the economy that it is hard to see how there can be a strong recovery whilst construction remains in recession.  The benefit of construction to the economy is well documented – for every £1 spent on construction, the economy benefits by £2.84.  So, despite the post election spending cuts, the next government must understand the long-term significance of its actions; if capital spending falls below 2.25% of GDP our public services will begin to deteriorate and economic recovery will be delayed.  Furthermore, the industry also provides essential public sector projects such as roads, rail, and energy infrastructure, as well as modern, efficient and low carbon buildings that are key to a sustained recovery in both the manufacturing and service sectors.’ Key points in the Construction Products Association forecasts are: – Construction output is expected to decline 3% in 2010 before 1% growth in 2011
– Industry growth only returns to trend levels of 2% in 2014
– 32% growth in private housing starts between 2010 and 2012.  Despite this increased level of housing starts, 2012 will be one of the lowest years for housing starts since 1946
– The industrial sector to grow 8% in 2011 following a 49% fall in output during the preceding three years
– Commercial sector output to return to growth in 2011, of 4%, following a 41% fall in output during 2009 and 2010
– Infrastructure sector set to grow 42% by 2014 with work on rail construction more than doubling in just five years