Data suggests the industry is on the up – but is this sustainable?

Construction firms may be suffering and shedding jobs, but the bald statistics so far for this year suggest that the industry is faring better than the gloomy news might indicate.

The latest construction output figures show that in pure cash terms the industry pocketed about £1.24bn more in the first five months of this year than in the same period in 2010. And 2010 proved a pretty good year in the end, with output rising by a hefty 7.7% in volume terms.

But can this be sustained?

The surge in work in the mid-months of last year certainly differed from the dark days of early 2009, as the industry benefited from the previous government’s fiscal stimulus and a perking up in some quarters of the private sector.

But the unsettling truth is that the path of construction for the rest of this year remains pretty uncertain. The big question is whether we will see a similar surge in work in the mid-months of this year.

Certainly one factor that appears to be at play in supporting construction activity is the resilience of public sector work - we even saw the Construction Products Association tweak its latest forecast to take this into account.

This raises the awkward question of whether this means a sharper fall in publicly-purchased construction work further down the line.

And worryingly, there is little sign in either the output figures or new orders figures to suggest that there is enough momentum in the private sector to be able to pick up the slack when the public sector work finally does collapse, as the government spending figures suggest it must.

So, while we should enjoy the fact that the industry has been busier so far this year, the final months of 2011 will prove a tougher prospect.