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Construction drags down growth as UK avoids triple-dip

The UK has narrowly avoided a triple-dip recession with growth of 0.3 per cent in the first three months of the year, as construction continues to hold back the rest of the economy.

Construction was the only sector to shrink, contracting by 2.5 per cent in Q1 2013 and reducing GDP growth by 0.17 per cent, following modest growth of 0.8 per cent in Q4 2012.

GDP sectors Q4 2012 Q1 2013

The figures – preliminary estimates for the quarter from the Office for National Statistics – mean that over the past 12 months construction output has fallen by 5.9 per cent.

Overall, the figures mean the economy dodged slipping back into recession – defined as two consecutive quarters of decline.

According to the ONS, a general increase was seen in construction work in February, though this was weaker than expected and did not make up for new work losses in January.

The data also showed that repair and maintenance work remained flat, while other new work excluding infrastructure has also declined to its lowest level since monthly data has been available.

Industry reaction:

Glenigan economics director Allen Wilen: “Urgent action is required to rebuild the confidence of private investors and to secure the rapid delivery of promised public sector investment.

“Unfortunately Glenigan has recorded a weakening in project starts in the first quarter which will hit construction output during the remainder of the year. Whilst poor weather will have played its part, Glenigan Index data to be released on Wednesday will provide the first indication as to whether this negative trend has continued in April.”

EC Harris head of strategic research Simon Rawlinson: “As a nation we can breathe a collective sigh of relief that the UK has avoided a third technical recession, but the reality remains that growth is exceptionally weak and there are currently very few levers available to drive confidence, investment and growth in the European economies, including the UK. 

“Construction will continue to experience very weak demand while these conditions remain, particularly with a very tough public spending review coming up. 

“However, hopefully we will see the housebuilding, industrial and perhaps commercial sectors start to see signs of recovery this year.”

UKCG Director Stephen Ratcliffe: “The fall in construction output was not unexpected. Market conditions remain challenging, and as a lagging indicator construction would trail behind growth in the wider economy.

“However, construction remains a £100bn sector and a major contributor to jobs and output. Government has recognised the importance of the sector, and the industry is working with Ministers to bring projects forward and build confidence in the sector”.

CITB deputy chairman Judy Lowe: “The news that Britain has narrowly avoided a triple dip recession is scant comfort to the construction industry. The industry is in a glacial depression. With our Construction Skills Network data showing 60,000 jobs lost in 2012 and a 8% drop in output, it is essential  that this key driver of economic growth gets the immediate boost it needs to kick start activity.

“The Government has responded positively to our industry-led Construction4Growth campaign. The pre- budget announcements on housing are welcome but we now need  immediate investment in  repair and maintenance projects.

“The figures speak for themselves:  every £100m invested in repair and maintenance takes  3,200 unemployed construction workers off  Job Seekers Allowance.  Plus it boosts local and national economies. Our message to Government is ‘back construction now and reap the rewards of economic growth’.” 



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