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09Aug91 UK: BUILDING MATERIALS PRODUCERS PREDICTS RECESSION TO GET WORSE FOR CONTRACTORS.

By Mark SmulianThe construction industry recession will get worse instead of better in 1992, according to a new forecast by the Building Materials Producers.Forecasting panel chairman Ian McKenzie, chief executive of Blue Circle Cement, said: 'There is no doubt prospects for this year and the next are dreadful.'Consumer and business confidence has been so badly damaged by the recession that recovery will be delayed until 1993 - even then it will be slow, said the panel.BMP - among the industry's most respected forecasters - had in April predicted an 8 per cent fall in construction output this year with a 0.5 per cent rise in 1992.Now it expects an 11 per cent fall in output this year, a 5.5 per cent fall next and a 2.5 per cent recovery in 1993.On BMP figures this would cut industry output from £35,016 million in 1990 to £29,435 million next year.Mr McKenzie said: 'In April we said we could see light at the end of the tunnel. We can still see light glimmering somewhere in 1993, but it is not a tunnel we have to go through, it is a black hole.'Industry confidence would not return until consumer confidence was clearly re-established, he said.Mr McKenzie warned of up to 50,000 job losses and permanent loss of capacity in the materials industry unless the Government takes action.He called for an immediate 1 per cent in interest rates, explaining that the series of half-points cuts was over-cautious and had sent the wrong signal to consumers.BMP economist Louise Manning said housing was 'the only hope for a short term upturn, but this is not as cheerful as had been expected. The upturn has been deferred by the 30,000 to 40,000 unsold houses and consumer confidence has been seriously dented.'Fear of unemployment, rather than the cost of mortgages, is seen as the main factor stopping people deciding to buy new homes. This fear is also affecting the domestic repair, maintenance and improvement markets, where only essential work is being undertaken.Ms Manning forecast a catastrophic drop for the private commercial market, caused mainly by a glut of offices in London.Water industry work had been expected to lead the private industrial sector out of recession, but orders are now expected to come through more slowly as companies spend first on technical developments.The offshore oil and gas construction industries offer one bright spot.The forecast assumes no change of government. Mr McKenzie said forecasters have examined Labour's programme and felt it would make little significant difference to prospects.A B C D E F G H1991(April) -12.0 -5.0 -5.0 -20.0 -12.0 -2.5 -8.01991(now) -16.5 -5.0 -7.0 -20.0 -13.5 -7.5 -11.01992(April) +20.0 nc +2.0 -17.0 -1.5 +3.0 +0.51992(now) +13.5 -3.0 -10.0 -30.0 -10.5 +0.5 -5.51993(April) +4.0 +1.0 +6.0 +5.0 +4.0 +4.0 +4.01993(now) +8.0 +1.0 +6.0-5.0 +2.0 +3.5 +2.5KeyA - Output forecasts %B - HousingC - Public non-housingD - IndustrialE - CommercialF - Total new workG - Repair and maintenanceH - TotalSource: BMP Forecasts, April and August 1991.