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ONS figures show UK recession may deepen

Construction output dropped by 4.8 per cent in 2012 Q1 according to revised ONS data - a fall of 1.8 per cent more than the original estimates released last month.

The figures suggest the UK economy is deeper in recession than first thought, with the -4.8 per cent drop now believed to amount to an additional -0.1 percent off the ONS first quarter GDP figures of -2 per cent growth.

The Office for National Statistics figures showed quarter on quarter volume reductions in six out of the nine sectors with the biggest decrease coming in infrastructure at - 15.9 per cent.

Scottish Building Federation chief executive Michael Levack slammed the ONS data, stating the volatility in the results led him to question their accuracy.

He said: “Our own anecdotal evidence is that the industry is suffering much more than the long-term official statistics would seem to suggest. It’s something the industry has repeatedly raised with the Office of National Statistics but we seem to be no further forward in improving the situation.

“In reality, jobs are down, bankruptcies are up, output has plummeted and there’s little prospect of recovery this year. These are the facts politicians should be using to determine what policies to pursue to get our economy moving again – not a rollercoaster of official figures that bear no relation to the real world.”

CECA director of external affairs Alasdair Reisner said: “These disappointing figures - the worst figures for two years - show that the UK’s construction industry still has a mountain to climb.

“For civil engineering contractors to play their part in delivering the infrastructure on which British businesses depend, and in doing so play their part in returning the economy to growth, the government must enable the establishment of new models of infrastructure funding with urgency, and continue to push to unblock stalled projects.”

The figures showed:

Total volume of construction output in the first quarter of 2012 fell by 3.7 per cent compared with the same quarter in 2011

Volume of all new work fell by 6.9 per cent and repair and maintenance fell by 0.4 per cent compared with the fourth quarter of 2011

Volume of all new work fell by 5.6 per cent compared with the same quarter in 2011 while repair and maintenance was flat

Public housing output fell 11 per cent during the first quarter of 2012 and public non-housing, which covers education and health, fell 7 per cent in Q1.

Construction Products Association economics director Noble Francis said the figures showed that the industry is now “firmly back in recession”.

“The fall in construction during Q1 is greater than ONS estimated for GDP just a few weeks ago and it is clear that this will have a negative impact upon Q1 GDP, making the recession significantly worse than initially expected,” he said.

“Unless confidence and lending improves significantly, private sector construction will remain subdued and the effects of further public sector cuts are likely to ensure that construction has a negative impact on the wider economy over the next 12 months.”

Turner & Townsend managing director Steve McGuckin said: “The construction sector came bottom of the class in last month’s GDP figures, and this more detailed report card lays bare the full extent of its underperformance.

“Frankly it makes for uncomfortable reading, with levels of both output and new work down on the same time last year, and on the last quarter of 2011.

“Most disappointing is the steep fall in new infrastructure work, though this is perhaps unsurprising given the government’s drive to cut the deficit.”

EC Harris head of strategic research and insight Simon Rawlinson said: “The ONS construction output statistics for Q1 2012 show, by any stretch, a shocking performance, but I don’t think we should press the panic button just yet.

“We always knew that output for 2012 was going to fall, with past new order data showing the signs well in advance.  What is particularly unusual is for infrastructure to have fallen by so much - it had a terrible couple of months in January and February.” 

Infrastructure was traditionally “a very bumpy industry”, he said, meaning the fall was likely to be a short term dip rather than a long term trend, due to the large backlog of infrastructure orders.

He added: “I would expect some rebound in Q2 and Q3 thanks to infrastructure picking up again.  We also need to see improved confidence and demand in housing, and for commerical to come back on track.  These figures show that the industry cannot rely on infrastructure work alone, we need the other sectors to improve if we are to get back into growth.”

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