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Energy price rises a threat to growth

NEWS - Construction output is forecast to rise but energy prices hit brick makers hard

INDUSTRY forecasters are predicting a return to growth in construction this year after output fell in 2005 for the first time in 11 years.

The drop last year bucked the trend of more than a decade of uninterrupted expansion.

But leaders of the Construction Products Association are predicting a gradual recovery during the next 12 months followed by stronger growth in 2007 and 2008, led by increased Government investment.

Association chief executive Michael Ankers said: 'In 2006 we expect to see a modest 1 per cent pick-up in overall construction output, largely due to a recovery in public sector investment.

'Looking further ahead, we expect to see more substantial growth in construction output during 2007 and 2008, at around 3 per cent per annum, as higher UK economic growth lifts private sector activity and Government presses on with the delivery of its investment plans during the current spending review.' The association highlighted increased energy costs as a prime factor in a challenging 2005. Gas prices continued to haunt the industry this week.

The 'gas war' between Russia and Ukraine ? which was resolved on Tuesday ? raised the spectre of a supply shortage.

That would be bad news for energyintensive brick makers who have already extended their traditional Christmas shutdowns because of falling demand and surging fuel costs.

Hanson announced before Christmas that it was stopping production at four factories throughout January and was planning price rises of 7 per cent.

Other manufacturers including Ibstock and Baggeridge also extended Christmas shut-downs at some of their plants.

The threat of further gas price rises is being closely monitored by the manufacturers. A spokesman for the Brick Development Association said: 'Before Christmas, decisions were being made almost on a day-to-day basis because of f luctuations in gas prices.

'That is sure to be the case now and firms will be keeping a keen eye on how conf lict affects energy prices.

'If there is a knock-on increase in gas prices it will have a considerable impact on the brick industry.'