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Infrastructure hits 30-year output high

Infrastructure output was the highest in 2011 for more than 30 years, according to the latest figures from the Office for National Statistics.

The ONS construction output figures released last week reveal the volume of infrastructure output was the highest seen since 1980 for both Q4 2011 and the year as a whole.

Infrastructure was worth £3.58 billion in Q4, 4 per cent up on the £3.44bn in Q3.

The 2011 total hit £13.66bn, 13 per cent higher than 2010 and the highest since infrastructure data has been recorded by the ONS, starting 31 years ago.

Total work fell 0.5 per cent over Q4 2011 to £27bn. New work fell by 0.6 per cent in the same period to £18.1bn, but total 2011 output was 2.8 per cent up on 2010, at £107.45bn.

Public new Housing output in 2011 was also the highest since 1980, at £4.4bn.

Private housing recorded the highest annual growth behind infrastructure at 8.2 per cent, though it was worth only 68 per cent of the £20.8bn peak in 2006.

EC Harris head of strategic research Simon Rawlinson said 2011 was a good year, but predicted continued falling output for 2012. 

He said the latest figures were the first to really show the effects of public sector spending cuts, after output held up better than expected for most of 2011.

Construction Products Association economics director Noble Francis said the overall downward trend in construction output reinforced concerns about the next 18 months.

But he said he was confident that infrastructure would be sustainable throughout 2012.

“I think there is more than enough in rail and energy to drive it forward. Some of it might be offset by road spending falling away. But a lot of the major infrastructure work will not start until 2013,” said Dr Francis.

Mr Rawlinson said: “Infrastructure is at a historically high level that will be sustained in the medium term. It is the sector compensating for everything else but it’s quite specialist so some contractors may find it difficult to enter the market.”

He points to private housing as another potential “upside” if mortgage indemnity gets more people into the market.

For the commercial sector, Dr Francis said the outlook was “very uncertain, and the economic climate is focused on London”.

Commercial output grew by 2.1 per cent between Q3 and Q4, but Mr Rawlinson pointed to a lack of confidence as stalling future growth.

“There are two trends: no one can get funding, which has continued to get more difficult with more banks withdrawing from the market, and organisations anticipated to provide the pre-lets are either postponing or moving into refurbished space.”

The ONS data showed output price indices in 2011 were lower than 2008, which it attributed to the current economic conditions and competition among contractors.

Figures this week from the Bank of England showed that total net lending from the UK’s five leading banks fell in every quarter last year. All five had also missed their Project Merlin lending target to small businesses.

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