ONS figures point to further falls in construction over next two years
Published:  06 June, 2011

LONDON: The construction new orders published today by ONS, show a 23% fall in 2011 Q1 compared to the final quarter of 2010, but the overall trend for the last 12 months shows a 7% fall, indicating a decline in construction activity over the next couple of years in line with the Construction Products Association’s latest forecasts.

Commenting on today’s figures, Noble Francis, economics director of the Construction Products Association said: "The fall in orders for this quarter follows a 26% increase from the previous quarter at the end of 2010. These two figures show that quarter on quarter the situation is very volatile.

"To achieve a more accurate picture of the longer trend it is better to look at the orders over the last 12 months and compare these with the previous 12 months. Over this period orders were 7% down with significant falls in the public housing, education and health and infrastructure sectors, only partially offset by rises in private housing, commercial offices and retail sectors.

"Looking at orders in the latest 12 months compared to the previous 12 months, public housing orders were 8% lower, education and health orders were 18% lower and infrastructure orders were 32% lower. This indicates the start of the public sector spending cuts that we had anticipated since the Comprehensive Spending Review and we would expect this fall in orders to feed through into construction output from the second half of the year.

"On the plus side, private housing orders during the last 12 months were 45% higher than during the previous 12 months. Commercial offices, retail and leisure orders were 6% higher over the same period. Both of which indicate a continued recovery in private sector construction.

"However, the sharp nature of the public sector spending cuts appear as though they will outweigh private sector recovery in the short term and, as a consequence, we forecast that construction output will fall in 2011 and 2012, by 1% and 2% respectively, before private sector recovery starts to drive growth in the construction industry as a whole."

Simon Rubinsohn, Royal Institution of Chartered Surveyors. chief economist, said: "Official figures for new construction orders received during the first quarter of the year paint a disturbing picture for the outlook for the sector. The volumes of orders received was the lowest since the first quarter of 2009 and, though the public sector was responsible for much of the decline compared with the final three months of last year, the private sector also produced disappointing results.

"To some extent this can be blamed on the volatile nature of the sector; the three quarter rolling average of new orders has been broadly flat since the middle of 2010. But after the more upbeat tone to sentiment as reflected in the latest RICS survey of the sector, today’s numbers provide a timely warning that the backdrop for the construction industry remains challenging as public spending cuts bite, the private sector only recovering in some areas and development finance still restricted."

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