Sector’s output hits hopes of avoiding recession

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THE UK’S construction output slid seven per cent in February on a year ago, new figures show, with economists fearing that the sector will be a drag on the country’s hopes of avoiding a return to recession.

While the sector grew by 5.5 per cent when compared with the result in snow-bound January, the performance of firms is still down 16 per cent on a quarter-on-quarter basis, the Office for National Statistics said.

Construction accounts for just under seven per cent of GDP and has contracted by 16.5 per cent when comparing the last quarter of 2012 with the first quarter of 2008.

Stephen Ratcliffe, director of the UK Contractors Group (UKCG), said: “This latest data shows conditions in the construction market remain challenging.

“The industry needs national Government to visibly deliver on its infrastructure pipeline and promises of funding guarantees to start restoring confidence.

“Local leaders also have a key role, and UKCG’s upcoming Creating Britain’s Future event with Leeds City Council will discuss how to boost local investment and bring more construction jobs to the area.”

The UKCG, which represents more than 30 leading UK construction contractors, who together account for a third of industry turnover, is set to launch its Creating Britain’s Future campaign in Leeds next month to highlight the national and local, economic and social benefits of investing in infrastructure.

Weak construction output was the main drag on growth during the first half of last year, helping to push the country back into recession. It remains touch-and-go whether Britain’s economy as a whole will record any growth in the first quarter.

Figures due on April 25 are currently forecast to show growth of just 0.1 per cent, following the decline of 0.3 per cent in the final quarter of 2012.

Activity so far this year has been hit by an unusually severe and prolonged winter, but there are signs that public sector infrastructure cuts are also having an impact.

“The month-on-month increase in February sounds encouraging but still leaves output well below the level seen before the winter weather set in December,” said Brian Hilliard, economist at Societe Generale.

IHS Global Insight chief economist Howard Archer said the latest survey evidence suggested the sector continued to struggle in March.

He added: “The key question going forward is will the construction sector see any significant improvement in its fortunes after its very difficult start to 2013 and a pretty torrid 2012.

“The sector undeniably still faces significant headwinds, notably including limited public investment and spending, an extended weak economy, comparatively limited housing market activity and problems in getting funding for large-scale projects.”

The Markit/CIPS construction index shows the sector contracted for the fifth month in a row in March. The only bright spot has been housebuilding where a firmer property market and Government homebuying initiatives have provided some cheer.

“Irrespective of whether we get 0.1 per cent growth in the first quarter or a 0.1 per cent contraction, it’s the same message: the UK economy is hardly growing at all,” said Alan Clarke, strategist at Scotiabank.

Steve Radcliffe, managing director at Clugston Construction, which has offices in Leeds and Scunthorpe, said: “Despite our own activity levels increasing due to continued success in the specialist waste and renewables sector, all the recent indicators point towards a likely further drop in general construction activity over the first quarter of 2013.

“In particular, new tenders in the traditional markets are down due to the continued decline in new public sector capital projects, which has not been counterbalanced by an increase in private sector projects.

“As members of the UKCG, we are actively involved in the Creating Britain’s Future campaign, which is due to arrive in Leeds on May 16.

“The aim of the programme is to point out the economic benefits of investing in the UK’s infrastructure and the need to press on with getting projects to site as soon as possible.”

The Creating Britain’s Future campaign has already been launched in London, Manchester and Birmingham.