Construction new orders reflect the good and the bad

Published:  10 June, 2013

Construction new orders for the first quarter of 2013, released last week by the ONS, fell 10 percent compared to the fourth quarter and were 0.2 percent lower than the same quarter one year earlier.

Although most sectors showed little change, the key differences were a marked rise in private housing orders and a significant fall in infrastructure activity.

Dr Noble Francis, economics director at the Construction Products Association (CPA), said: “Recent GDP figures have pointed to signs of growth in the overall economy, but construction has continued to face very challenging conditions with output already 7 percent lower than a year ago. Today’s new orders figures reflect these continuing difficulties.

“Most encouraging was indication of growth in the private housing market. Government policies – particularly FirstBuy, Funding for Lending and the recently announced Help to Buy – are giving major housebuilders the confidence to build. Because private housing has a short time-lag between orders and output, these new orders should lead to a further rise in housing activity this year.

“Of greater concern, however, is the 50 percent drop in the infrastructure sector since the previous quarter and the 39 percent fall compared to Q1 last year. This came despite the government’s regular and enthusiastic pronouncements of support over the last two years, such as the Chancellor’s £5bn capital investment ‘boost’ in last year’s Autumn Statement, £20bn in new private investment in infrastructure and a further £5.5bn capital investment ‘boost’ in December.

“As we have previously highlighted, the government must do better at translating such infrastructure announcements into new orders and real activity on the ground. Those aimed at housing are clearly delivering a beneficial effect; infrastructure must match this if we are to have a sustained economic recovery.”

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