Interesting Commentry from Noble Francis

While we’re on the subject check out this article by Noble Francis published by Construction News…..

Also, I would highly recommend a subscription to Construction News (if you don’t already have one) – up to the minute, well presented insight into the UK construction industry.


GDP & Construction Output (Q2 2012)

National output shrank by -0.70% during Q2 of 2012 according to seasonally adjusted, provisional figures published by the ONS this week.

 Not a huge surprise given the lack of growth over the last 3 quarters, and the awful weather, but what about the relationship between construction and GDP………here is what the ONS say:

 ‘The seasonally adjusted index of construction output decreased by 5.2 per cent in Q2 2012, following a decrease of 4.9 per cent in the previous quarter. Construction output decreased by 9.7 per cent between Q2 2011 and Q2 2012.’

GDP & Construction Output

GDP & Construction Output

Although we saw weakness in the production and services sectors, the biggest contribution to the shrinking national output appears to be construction (or lack of it) in particular the anticipated decrease in publically funded work coupled with a lack of notable recovery in the private sector (which we hoped would help to bolster overall construction output while the public sector spending dwindle continues).

 The bleak trend was reiterated by The Construction Products Association (CPA) who have downgraded forecasts for the UK construction industry from their spring update; now forecasting a contraction in volume of -4.50% this year and -1.30% in 2013 with recovery starting in the early part of 2014 thanks in part to likely rejuvenation of public sector capital budgets.

Volume of Construction Output – May 2012

In constant (2005) prices, non-seasonally adjusted, the recent ONS release shows the total volume of construction output fell 6.30% from £8,876m to £8,317m in May 2012 compared with the May 2011.

 The decline is driven by a decrease in new public work specifically:

  •  the volume of new public housing work decreased by 22.9%
  • the volume of new public non-housing (excluding infrastructure) decreased by 21.5%
  • the volume of new infrastructure decreased by 21.3%
Analysis in Brief

Analysis in Brief

Volume of construction output was sighted as a key contributor to the UK’s re-entry into double-dip recession and given the output in May this trend looks set to continue although we must keep in mind that figures are not seasonally adjusted so the impression made by the Queens Jubilee is not taken into account. 

There may however, be some much needed light at the end of the tunnel ; after months of pronouncements of intent to boost construction starts and thus the UK economy, the government has this week announced they will use their strong credit position to guarantee £40 billion of eligible projects from the National Infrastructure Plan before 2015. The announcement seems to have been welcomed by industry leaders although the right funding model will be crucial……we await the birth of the ‘son of PFI’!