Construction recession hampers UK recover

The continuing recession in the UK construction industry is holding back recovery in the wider UK economy according to the latest Construction Products Association forecasts.
The association says that, at around 9% of GDP, construction is an essential part of the UK economy and if it remains in the doldrums, recovery for the economy as a whole is likely to be slow and protracted.

C construction activity fell 3% during 2010, a much better performance than last year’s dismal 12% fall; the industry’s worst decline in more than 35 years.

Growth is not expected to return until 2011 and even then it is likely to be relatively subdued at just 1% per year in the next three years. Growth levels of 2% are only expected to return in 2014.

Yet, the Association predicts growth of 32% in private house building between 2010 and 2012, although, as housebuilding numbers are at historically low levels, this will still be quite subdued.

Other key points are:

  • The industrial sector to grow 8% in 2011 following a 49% fall in output during the preceding three years

  • Commercial sector output to return to growth in 2011, of 4%, following a 41% fall in output during 2009 and 2010

  • Infrastructure sector set to grow 42% by 2014 with work on rail construction more than doubling in just five years

    CPA chief executive Michael Ankers said; ‘This is not good news for the industry or the wider economy. The construction industry is such a major part of the economy that it is hard to see how there can be a strong recovery whilst construction remains in recession.

    “The benefit of construction to the economy is well documented – for every £1 spent on construction, the economy benefits by £2.84. So, despite the post election spending cuts, the next government must understand the long-term significance of its actions; if capital spending falls below 2.25% of GDP our public services will begin to deteriorate and economic recovery will be delayed.

    “Furthermore, the industry also provides essential public sector projects such as roads, rail, and energy infrastructure, as well as modern, efficient and low carbon buildings that are key to a sustained recovery in both the manufacturing and service sectors.”

  • About Fiona Russell-Horne

    Group Managing Editor across the BMJ portfolio.

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