Construction sector blamed for double-dip recession

Published:  30 April, 2012

The struggling construction sector is being partly blamed for putting the UK economy back into recession, after the Q1 2012 GDP figures were released last week.

Construction sector output fell 3% in the first three months of 2012, with UK GDP falling 0.2% overall. This was the second consecutive drop in GDP after a 0.2% fall in the last quarter of 2011, meaning that the UK is now officially back in recession.

Noble Francis, Construction Products Association (CPA) economics director, said: "Given the sharp effects of public sector spending cuts over the past 12 months it is unsurprising to see that construction returned to recession in the first quarter.

"With new orders for construction falling 14% in 2011, the industry is likely to endure further falls. Our latest forecasts for construction anticipate that the industry will fall considerably this year and remain flat in 2013, severely delaying recovery for the economy as a whole.

"Given that independent economic analysis has shown that for every pound spent in construction, £2.84 is generated for the wider economy, it is essential that government does its utmost to switch its current spending towards the more productive capital spending."

CPA chief executive Michael Ankers added: "The construction industry accounts for nearly 9% of GDP and therefore is going to be a major constraint on growth in the wider economy over the year ahead.

"Public sector spending cuts are now beginning to bite and, with the exception of a steady recovery in the private housing market, where starts are forecast to increase by 5% this year and 11% next, the private sector is pretty subdued.

CPA forecasts expect public sector construction work to fall by 18% between 2011 and 2014, while it believes private sector construction will rise 21% by 2016. Total housing starts this year are expected to be less than half that needed to match the number of households being created.