New construction orders remain flat

The latest construction orders figures from the Office for National Statistics showed there was a large increase in ‘other’ public work, which excludes housing and infrastructure, which grew by 31.5%.

However, it said there were decreases in new infrastructure work – down 20.4% - and private industrial work – down 13.3%.

The figures also showed the volume of orders for private housing increased by 9.2% on Q1, while new orders for public housing increased by 7.2% compared with the previous quarter

The Q2 figure was 11.1% higher than in the second quarter of 2011 – but Q2 2011 represented the lowest level of new orders since Q3 1980.

New orders in 2011 were, accounting for inflation, were at their lowest ever level since the data was first recorded in 1980, 39% below the peak of the market in 2006.

The figures come after the latest Markit/CIPS Construction PMI survey found British construction activity fell at the fastest rate in nearly three and a half years in August.

CECA’s director of external affairs Alasdair Reisner said: “While today’s figures show welcome growth in orders for the construction industry as a whole, it is worrying that infrastructure orders have fallen steeply for the second consecutive quarter. This reverses much of the gains made during a mini-recovery for the sector last year, and throws into doubt the chances that new infrastructure will be able to support growth in the wider economy.

“Given the strong case for infrastructure investment as a route to rebuild the economy, it is essential that the government and industry work together to find ways to release new work as quickly as possible. With the publication of its report Infrastructure: the Routemap for Growth, CECA has set out the steps that must be taken to deliver on this strategy and achieve growth in the economy.

“CECA has warned that unless the government begins to address the infrastructure crunch its members are facing, the sector will continue to act as a drag upon the wider economy.

“It is vital that the government acts to give the economy the shot in the arm it requires, by providing immediate short-term funding to boost shovel-ready repair and maintenance activity, rebalancing infrastructure investment across the UK, and ensuring that appropriate finance and funding models are in place to meet future infrastructure needs.”

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.”