Worst fall in construction output on record

The construction output figures from the Office for National Statistics covering the first quarter of 2009 highlight a 16% fall compared to the same quarter a year earlier. This is the sharpest decline on record.

Private housing output fell 32% in the first quarter compared to a year ago, industrial new build output dropped by 40% and the commercial sector fell by 26%. Even in infrastructure, expected to be buoyed by significant workloads in the rail sector, output in the first quarter of 2009 was 5% lower than one year earlier.

Commenting on these latest figures, Noble Francis, economics director of the Construction Products Association said: “These figures confirm the seriousness of the downturn that is facing the industry. A large number of jobs have already been lost and there is clearly a lot of pain still to be had. However, the government has shown its desire to bring forward capital spending to help provide a fiscal stimulus to the economy, unfortunately it is unclear exactly how this money is being spent and what it is intended to deliver. With the industry facing such gloomy prospects, it is therefore essential that the government recognises the urgency of the situation and ensures that these announcements feed through to actual work on the ground.”

Although recent news from Halifax, Nationwide and RICS has suggested that there may be a slight recovery in the housing market, it is going to be a while before this feeds through into actual output, especially with 2009 Q1 new orders 50% lower than a year earlier.

Other figures from the report showed that industrial new build has had its largest fall on record fell 40% compared to a year ago. Given that new orders in industrial fell a staggering 62% in the first quarter of 2009 compared to a year earlier, industrial output will be expected to fall further during 2009.

Output in the commercial sector fell by 26% in the first quarter of 2009 compared to a year earlier. Again, with new orders in commercial falling 55% in the first quarter, output will be expected to fall further through 2009.

Public housing fell 12% in the first quarter of 2009 compared to a year ago, especially disappointing in the light of government’s announcements in the last Pre-budget 2008 and Budget of increased funding for public housing.

Public non-housing rose 7% in the first quarter of 2009 compared to the same quarter one year earlier, still buoyed by work in education and health although the state of the public finances means that in the medium term, there must be serious concerns regarding public funding for construction and new orders in the first quarter of 2009 fell 24% compared to a year earlier.

It is not only new work that has been affected by the recession. Private housing repair and maintenance in the first quarter of 2009 fell 10% compared to a year earlier and 16% compared to the previous quarter, with lower economic activity and job insecurity hitting consumer confidence and consequently, the improvements market.

Noble Francis said: “The only solace in these figures is that 2008 Q1 saw the highest level of construction output ever and although the latest results from the ONS highlight the sharpest fall on record, it is from an all time high. However, this will be of little comfort to construction product manufacturers who have already lost more than 60 000 jobs and continue to experience difficult conditions across the industry.”