New construction orders crash to lowest ever level

New orders in the second quarter of 2011 fell by 16.3 percent in comparison with the first three months of the year, according to the latest update by the Office of National Statistics.

The figures, released this morning, show that new orders adjusted for inflation in the second three months of the year were at their lowest level since data started being collected in 1964.

The release says the figure, the for the first quarter since the bulk of the public sector cuts outlined in the Comprehensive Spending Review were actually introduced, is also almost a quarter lower than the same period in 2010. New orders were down 23%, it said.

The only sector to record any sequential growth was private industrial work, the figures show.

The seasonally adjusted data, which is recorded at constant 2005 prices, shows just £9.503bn of new work was ordered between April and June this year, lower than the previous low reported in the third quarter of 1980, of £9.518bn.

The largest falls in new orders were in the public housing sector, down 31%, the infrastructure sector, down 26%, and public non-housing work, down 30% on the first quarter of the year.

The falls come on top of a 13% fall in orders in the previous quarter.

Public non-housing orders have now dropped by 44% since the second quarter in 2010, showing the impact of government spending cuts.

Worryingly, private commercial orders were also down marginally, dropping by just over 5% on the previous quarter.

Construction Products Association chief executive Michael Ankers said: “This is an alarming set of figures at a time when the economy is already slowing and the construction industry is seen as having a major part to play in rebalancing the economy. Whilst the fall in public sector orders of 30% is no surprise given the cut back in public sector spending, it is particularly alarming to see the fall in new orders for private sector construction – down 8% on the first quarter of the year and 10% down on the same quarter last year.”

Alasdair Reisner, director of external affairs at the Civil Engineering Contractors Association, said: “It’s hard to see any silver lining on this particular cloud. No one was expecting stellar order figures, bearing in mind the impact of public spending cuts and the more
general economic environment both here and abroad, but it’s the sheer scale of this drop that is concerning.”

Economics commentator Brian Green described the figures as “carnage.” He said: “The new orders figures were worrying last quarter, and now this quarter they look even grimmer. While public sector cuts have been expected, it is in some ways more worrying what is being shown in the private commercial sector.”

The news comes as the latest construction purchasing managers’ index continuing to weaken, with a figure of 52.6 for August. This is down from 53.5 in July. It also found confidence was at its lowest level for eight months.

Steve McGuckin, UK managing director of consultant Turner & Townsend, said: “Confidence is now at its lowest level for eight months, but my view is that there is no need to break out the “End is nigh” sandwich boards.

“There is a substantial lag between what’s seen by the contractors - who are the focus of this survey - and the consultants in the vanguard of the industry. In many ways, the contractors are now feeling the pressure that consultants went through a year or two ago.”

Click here to download the ONS release.