Construction to fall back into recession

The UK construction industry looks set to fall back into recession despite strong growth in the first six months of the year.

According to the latest forecast by the Construction Products Association (CPA) output will fall in the remaining months of this year and will continue to decline into the first part of 2011.

In 2009 the construction industry suffered its sharpest fall in output since 1974. It has rebounded in the first six months of this year, however the CPA warns that the figures are deceptive and are the result of the last government’s fiscal stimulus combined with a tentative recovery in the housing market and the start of a number of major projects in the run up to the election. It addsi it is not the basis for a long-term recovery.

Michael Ankers, chief executive of the Construction Products Associatio, said: “Although 2010 as a whole is likely to be slightly better than 2009, it is very much a year of two halves with construction output slipping back in the second half of the year as a result of growing uncertainty in the housing market and cuts in public spending”.

Looking forward, Ankers said the industry needs to see strong private sector growth to offset the anticipated reduction in public investment that over the coming years.

However, the latest figures on new orders for construction work, published on Friday, show recovery in orders for private sector work go nowhere near what is needed to offset the anticipated 18% fall in public sector construction work over the next two years.

Ankers added: “Whilst we can see the prospects for a pick-up in output in 2012 and the following two years, this recovery is going be slow and hold back a more rapid growth in the wider economy. Even by 2014, output in the industry will not even have recovered to the levels it experienced in 2003.”

He called on government to recognise that spending cuts and tax rises alone will not secure long-term economic growth and to invest in essential infrastructure.