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Cautious welcome for construction order rise

New orders for construction work improved slightly in 2012, according to new figures published today.

The Office for National Statistics found that orders for new work grew by 0.4 per cent or £189m in 2012 compared to the previous year.

Construction market analysts gave the figures a cautious welcome as the first tentative signs of recovery.

Over the year the biggest rise – 35.1 per cent - was in private industrial but this is a small sector.

More significantly, the second largest increase was a £2bn growth in infrastructure but all the other sectors saw falls. The largest drop – 13.1 per cent or £1.2bn – was in the public sector, and construction’s largest subsector, private commercial, also saw orders fall by 9.3 per cent.

The rise in news orders for 2012 was helped by an upward revision in new orders for the third quarter from 5.4 per cent to 10.5 per cent, along with smaller upward adjustments for the first six months of the year.

The final quarter of 2012 was 11.2 per cent up on the same period in 2011. All sectors bar infrastructure rallied in that time.

Infrastructure saw a 12.5 per cent fall (£327m) in the fourth quarter of 2012 compared to the same period in 2011. Commercial rose 13.6 per cent (£361m), public housing 46.5 per cent (£222m) and other public work grew by 24.8 per cent (£405m).

Similarly, the last three months of 2012 saw a 3.4 per cent increase in orders compared to the third quarter of the year. Again there was a growth in orders for all sectors except for infrastructure in that period.

Infrastructure fell 15.4 per cent (-£416m) but private housing rose 10.3 per cent (£229m) and commercial 9.7 per cent (£265m).

Construction Products Association economics director Noble Francis said the results were positive.

“If this continues we are looking at construction output recovering in about 12 to 18 months,” he added. “New orders are 38 per cent below their pre-recession peak but it looks like it is starting to come back in terms of orders from the low which was in the middle of last year.”

He was particularly pleased with the recovery in private housing new orders as these could translate into work on site in the next six months. While infrastructure had a difficult final quarter of the year, he hailed its year-on-year rise while adding that these projects can take longer to begin than those in other sectors.

The unexpected rise in social housing in the fourth quarter of 2012 was attributed more to a hiatus at the end of 2011 caused by a new system of social housing funding contracts. Similarly the end of year rise in public work such as health and education could be explained by the award of priority schools building programme contracts at the end of 2012.

Dr Francis’s message for the chancellor George Osborne ahead of this month’s Budget is that schemes such as Funding for Lending have helped the private housing sector and other areas of construction could also do with assistance in attracting investment.

EC Harris head of strategic research Simon Rawlinson said: “In December, we stated that infrastructure and the commercial sector would be the drivers of the recovery – and it is encouraging to see that these sectors saw a significant upward revision for the third quarter – totalling around £500m.

“Commercial saw a further increase in volume of £250 million during the fourth quarter – albeit that levels of workload still remain at a historic low.

“Two quarters of continued growth in orders have not been recorded since 2009, but the statistic is notoriously volatile, so it is best not to read too much into the trends. However, given that the construction industry is a sector starved of good news, this data will provide some relief to everyone in the industry.”

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