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Page 16 Contractors World - UK & Ireland Vol 1 No 5

Construction Output Figures Revised for Q2

In a statement by the Constructon Products Associaton, they report that constructon output figures for the second quarter of 2011 have been revised upwards by the Office of National Statistics, from 0.5% to 2.3%. Yet despite this improvement the underlying directon contnues to cause widespread concern as public sector cuts are only just beginning to afect these fgures.

Commenting on the ONS revision, Kelly Forrest, senior economist at the Construction Products Association said, “Although these figures for Q2 indicate a slight improvement for construction output, they come after two quarters of contraction. It would therefore have been very surprising if the industry hadn’t experienced some recovery. Unfortunately if you examine the figures in detail, they show that whilst private sector work has started to recover, it is nowhere near enough to ofset the public spending cuts from the Comprehensive Spending Review. This quarter has seen public sector work fall by less than 1%, so there is plenty more contracton stll to come. ‘This means that the outlook for the next 18 months is very poor and we are forecastng a fall in constructon output of 1% this year compared with 2010 and a further 2% fall in 2012. We are not antcipatng a return to growth untl 2013, and inevitably this will be a constraint on recovery in the wider economy as constructon accounts for nearly 10% of GDP.”

Exports Provide Some Respite for Construction Product Manufacturers

On a brighter note, however, the Associaton’s latest ‘State of Trade Survey’, which was launched in July, indicates that for many constructon product manufacturers, export actvity is providing a vital lifeline, whilst the outlook in the UK remains very uncertain.

With the total number of manufacturers exportng goods increasing by 18% compared to Q1 and overall export volumes rising, construction products sales increased for the second consecutive quarter in 2011, aided by a compettve exchange rate.

However, despite this positve news, there was growing concern over increasing cost pressures with 59% of frms reportng fuel, energy and raw material price infaton during the last 12 months, which concurs with the latest ONS data reportng that manufacturing input prices rose 17% over the past year. Furthermore the Associaton’s survey suggests that costs are expected to increase further in the coming year.

Commentng on the fgures,, Kelly Forrest said, “Whilst demand for the UK domestc market remains subdued, an increasing number of product manufacturers are turning to exports. These companies are quietly optmistc for the next 12 months. However, with consumer sentment faltering at home and macroeconomic forecasts downgraded once again, there is enormous concern that domestc demand will decline as public spending is cut over the coming months.

“Although manufacturers are currently beneftng from a favourable exchange rate, there is great concern within the industry that this will be outweighed by the contnual impact of rapidly rising costs.”

More bad new as Public Sector cuts start to bite

Just as the industry begins to come to terms with the severe economic situaton, along comes more bad news. The Constructon Product Associaton has also commented on the latest ‘Constructon Trade

Survey’. Probably antcipated by many, it shows that the cuts to public spending, announced by the government last autumn, have fnally started to impact on constructon actvity, confrming the fears the industry has warned about for some tme.

Whilst these latest indicators refect the scale of government retrenchment in the public sector, anaemic economic growth, a beleaguered consumer sector and the continuing reluctance of financial institutions to increase their exposure to the built environment, are all restrictng the private sector recovery. Commenting on the survey, Noble Francis, Economics Director at the Construct ion Products Associat ion said, “Construction activity fell in most sectors during the second

Construction News - Industry Briefing

Kelly Forrest, senior economist at the Constructon Products Associaton

Photo: Thomas Nugent

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