Construction recession receding?

Economists and industry observers were caught by surprise at the beginning of December when figures from the Office for National Statistics (ONS) showed the construction industry as having enjoyed two consecutive quarter's growth – on other words, as being out of recession. So was this a blip or the start of a trend?

Data for the third quarter showed output as having risen by 2 per cent in the three months to 30 September 2009 on the back of a £1bn increase in repair and maintenance work. With a revision to the second quarter figures that included nearly £600m of new work the ONS' findings show the construction industry as having officially come out of recession in June.

Sadly, the effect was spoiled somewhat by the news six days later – also from the ONS – that new orders were down by 5 per cent in Q3, although this was probably a more accurate reflection of what most companies are experiencing.

Nick Whitten of Architects Journal reports that the confusion was further exacerbated by the ONS' releasing GDP figures in November that showed construction output as having declined 1.1 per cent in Q3, based on forecasts taken from a quarterly construction trade survey by credit agency Experian. The latest figures were taken from the ONS' quarterly survey of 12,000 VAT-registered construction businesses, in which they were quizzed about the value of work done in the previous quarter.

The 2 per cent rise in construction output means that the GDP as whole fell by just 0.2 per cent in the third quarter. With revisions in other sectors expected later this month, according to Whitten the UK could already officially be out of recession.

Architects Journal quotes an unnamed ONS spokesman as saying: "It is a big, robust survey and we have good coverage of the industry. We are confident in our results."

Construction Products Association economics director Noble Francis meanwhile, reportedly described the large rise in repair and maintenance work as, "somewhat of a surprise."

"It is a low profile area where the Government could cut spending without making too many headlines. Public repair and maintenance is only very basic repairs like potholes on roads [sic] so it is hard to understand where all this extra increase has come from."

Allan Wilen, economics director at business intelligence unit Glenigan, sounds a cautionary note, stating that the current rise may be short-lived as public sector repair and maintenance work is likely to come under increased pressure from lower budgets across the next twelve months.

The growth comes on historically low figures, with industry output of £25bn in Q3 representing a 9 per cent decrease from the same quarter in 2008. Latest figures show repair and maintenance work accounting for £11.bn in Q3, up 10 per cent on the previous quarter. However, that was offset by a fall in new work of 4 per cent, down from £14.2bn to £13.6bn.

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