The latest quarterly ONS figures for construction new orders released today show that new orders for construction remained at a depressed level in the second quarter of 2012, despite having risen 1.5% in the first half of 2012 compared to the same period one year earlier. New orders remain 40% lower than the pre-recession peak.
Commenting on the new orders data, Noble Francis, Economics Director at the Construction Products Association said: ‘The adverse effects of the public sector cuts are clearly highlighted in these ONS figures. New orders for public housing in the first half of the year were 24% lower than a year earlier and orders for public non-housing, which covers education and health, were 19% lower than a year earlier.
‘With new orders at such historic lows, it is imperative that government does more to stimulate construction and the economy. Despite numerous announcements and initiatives from government over the past 12 months, the private sector recovery remains sluggish, as public sector investment falls sharply. The economic recovery will only return when investment is made, therefore government must decide its priority between its current and capital spending whilst at the same time provide a robust model to attract private finance.’
Steve McGuckin, UK managing director of the programme management consultancy Turner & Townsend, commented: “The headline number is positive, but the good news is thin. Total new orders are creeping up, both on the quarter and over the same time last year.
“Most of the quarter to quarter growth is being delivered by the public sector. While the extra work is good for the construction industry, it isn’t a sign of growth or confidence in the economy as a whole.
“Private sector and infrastructure construction provide a much better barometer of the nation’s economic health. And the outlook there is challenging.
“Private industrial and commercial orders are both down, and infrastructure orders have dropped by more than a quarter in six months.
“Private housing orders are up a touch but have only returned to last year’s levels. The government is hoping that by easing planning restrictions it can inject extra life to the sector, but the real reason it is so sluggish is affordability and the lack of mortgages at higher LTVs.
“But there’s no hiding that across most of the private sector, orders are down – and this is placing huge pressure on the construction industry.
“The pressure is causing a split between the limited number of big players who have a strong balance sheet and the capability to deliver the big projects, and the small and medium-sized firms who are being squeezed to breaking point by ever-greater competition.
“The increase in new orders has to be welcome, but the fact that the growth is primarily coming from the public sector means it may not last.”
