ONS Figures Point to Further Falls in Construction Over Next Two Years

The construction new orders published last week by the Office of National Statistics (ONS), show a 23 per cent fall in 2011Q1 compared to the final quarter of 2010, but the overall trend for the last 12 months shows a 7 per cent 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 the figures, Noble Francis, Economics Director of the Construction Products Association said:  ‘The fall in orders for this quarter follows a 26 per cent 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 per cent 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 per cent lower, education and health orders were 18% lower and infrastructure orders were 32 per cent 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 per cent higher than during the previous 12 months. Commercial offices, retail and leisure orders were 6 per cent 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 per cent and 2 per cent respectively, before private sector recovery starts to drive growth in the construction industry as a whole.’