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Output set to rise from 2010 - but very slowly

Construction output will remain subdued until the first quarter of 2011, according to the latest Glenigan Index.

Based on projects currently being tracked, business intelligence firm Glenigan forecasts the index - which measures UK construction output - will be 18 per cent down in the second quarter of 2009 on a year ago.

It then predicts that the index will improve slightly in 2010 - up by 13 per cent year on year in Q2, 8 per cent in Q3 and 7 per cent in Q4. However, as these figures are measured against low output in 2009, they do not mark a significant recovery.

The index measures output against a 2006 benchmark of 100, and scored last month as 77.2. Glenigan economics director Allan Wilen said: “While we expect the index to move off current low levels during the second half of the year, the value of underlying construction starts will be weak for some time, and construction activity is expected to remain subdued until 2011.”

The Glenigan Index for April recorded a 30 per cent fall in new construction project starts from a year ago, with the decline led by a halving in housing schemes and a sharp fall in non-residential projects. Glenigan also noted significant falls in project starts in the health, education and community and amenity sectors.

Last autumn’s Pre-Budget brought forward some £3 billion of capital investment from 2010/11, but declines in public sector starts highlight the Government’s slow progress in using it.

This is reflected in a £700 million capital underspend in the last financial year in the four key areas of health, education, transport and social housing. Civil engineering project starts have picked up sharply since the start of the year.

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