Construction sector supports modest growth figures

The latest set of GDP figures, published by the Office of National Statistics, show that construction output grew by just 0.5% per cent in the second quarter of the year after falling in each of the previous two quarters.
Growth in construction over the last three months was a significant contributor to the modest increase in GDP as a whole, but all indications are that this will not continue.

The ONS figures revealed production output dropped by 1.4% in the three months, although this was offset by the powerhouse services sector, where output rose by 0.5%, and in construction where output rose by 0.5%.

Manufacturing fell by 0.3%, partly blamed on the post-tsumai troubles in Japan, while the warm weather also affected gas and electricity demand.

Year on year the UK economy grew by 0.7%, the lowest rate of growth since the first quarter of 2010.

Some economists had warned that a 0.2% contraction in GDP was possible for the quarter, and Chancellor George Osborne, is coming under increasing pressure to reverse the VAT rise to encourage consumer spending.

However, he said: “The positive news is that the British economy is continuing to grow and is creating jobs. Our economy is stable at this time because this Government has taken the difficult decisions to get to grips with Britain’s debts. Abandoning that now, as some argue we should, would only risk British jobs and growth.”

Michael Ankers, chief executive of the Construction Products Association said: “These estimates are very much in line with our own industry surveys and the information our members are telling us confidentially. Growth in private sector construction has finally begun to recover and although public sector construction output remains stronger than we had anticipated it is clear that the impact of the public sector spending cuts is still to be felt and is forecast to cause sharp falls later this year.

“These public sector cuts will begin to hit the construction industry in the second half of the year. With the continuing economic uncertainty and falling consumer and business confidence, we are forecasting that construction output this year will be slightly lower than in 2010. However, looking further ahead to 2012, we expect the recovery in the private sector still to be insufficient to offset further sharp falls in public sector spending and output next year is expected to be 2.5% lower than in 2011.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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