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New construction orders flat as infrastructure slides

A marginal increase in new construction orders has been recorded for the second quarter of the year.

New orders increased by 0.2 per cent compared with the first quarter, and were up more than 11 per cent on the same period of last year.

The figures contradicted indications from the Markit/PMI earlier in the week that new orders were in a steep decline.

Q2 2011 represented the lowest level of new orders since the third quarter of 1980, and the new order rate is down substantially on Q2 2010.

The 0.2 per cent increase was tempered by a 20.4 per cent fall in new infrastructure work and a 13.3 per cent reduction in private industrial.

However, infrastructure new orders are estimated to have been 38.5 per cent higher in the past quarter than in the same period a year ago.

A big winner was public new work – excluding housing and infrastructure – which jumped by almost a third.

New orders for public housing in the first half of the year were 24 per cent lower than a year earlier, while orders for public non-housing, which covers education and health, were 19 per cent lower than a year earlier.


Construction Products Association economics director Noble Francis said: “With new orders at such historic lows, it is imperative that government does more to stimulate construction and the economy. 

“Despite numerous announcements and initiatives from government over the past 12 months, the private sector recovery remains sluggish, as public sector investment falls sharply. 

“The economic recovery will only return when investment is made, therefore government must decide its priority between its current and capital spending while at the same time providing a robust model to attract private finance.”

New orders for private new builds increased by 9.2 per cent on last quarter, and 4.6 per cent on the year before. Public orders increased by 7.2 per cent compared with Q1, though this represented a decline of 5.2 per cent on a year earlier.

There were 10,785 new orders in Q2 2012, compared with 10,760 in Q1 and 9,704 in Q2 2011.


Civil Engineering Contractor’s Association director of external affairs Alasdair Reisner welcomed the overall growth in orders, but warned that “it is worrying that infrastructure orders have fallen steeply for the second consecutive quarter”.

“This reverses much of the gains made during a mini-recovery for the sector last year, and throws into doubt the chances that new infrastructure will be able to support growth in the wider economy,” he added.

“It is vital that the government acts to give the economy the shot in the arm it requires by providing immediate short-term funding to boost shovel-ready repair and maintenance activity, rebalancing infrastructure investment across the UK, and ensuring that appropriate finance and funding models are in place to meet future infrastructure needs.”

Turner & Townsend UK MD Steve McGuckin warned that the concentration of work in the public sector meant the increase may be transient.

“Most of the quarter-to-quarter growth is being delivered by the public sector,” he said.

“While the extra work is good for the construction industry, it isn’t a sign of growth or confidence in the economy as a whole.

“Private sector and infrastructure construction provide a much better barometer of the nation’s economic health – and the outlook there is challenging.

“Private industrial and commercial orders are both down, and infrastructure orders have dropped by more than a quarter in six months.

“Private housing orders are up a touch but have only returned to last year’s levels.

“The government is hoping that by easing planning restrictions it can inject extra life to the sector, but the real reason it is so sluggish is affordability and the lack of mortgages at higher LTVs.

“The pressure is causing a split between the limited number of big players who have a strong balance sheet and the capability to deliver the big projects, and the small and medium-sized firms who are being squeezed to breaking point by ever-greater competition.”


EC Harris head of strategic research and insight Simon Rawlinson said the figures pointed to some stability: “Today’s new order figures for the Q2 show virtually no change from Q1 and will sooth some frayed nerves in the Treasury and the wider industry.

“These figures are from the same three months during which output was recorded as falling by 5.2 per cent, which suggests that the forward pipeline of work is stabilising, in line with industry forecasts for a shallow downturn in 2013.

“Q2 new orders suggest that there will be greater stability in activity levels as we move into 2013, but we are by no means out of the woods.

“The contribution of the public sector to maintaining volumes of activity is not sustainable, and the continuing dour performance of the commercial sector, including PFI, must be a cause for concern. 

“The data could have been a lot worse, but does not yet point to growth.”

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