Next quarter could see output drop by 5%
Analysts have warned that the 0.6% drop in construction output unveiled today may foreshadow longer-term shrinkage across the industry.
James Hastings, head of construction futures at Experian’s business strategies division, predicted the sector would contract further over the next quarter.
“We could be looking at something like a 5% decrease, quarter on quarter, in the fourth quarter of the year,” he said.
He added: “All we have at the moment is a headline figure for construction. My feeling would be that if one were to deconstruct that, what we’re starting to see now is the beginning of the steep fall that we’re all expecting in sectors like public housing.
“The legacy programmes left, like Building Schools for the Future, are starting to complete and there’s just not anything like that much education work coming into the pipeline.”
Kelly Forrest, senior economist at the Construction Products Association, said she expects the 0.6% GDP figure to be revised downwards when September’s data becomes fully available.
She said: “Cuts to public sector capital budgets are now having a tangible impact on workload. These cuts coupled to the hiatus in PFI work and a faltering private sector mean that the near-term outlook for the construction industry is very poor. Following the publication of the association’s own forecasts last week we expect construction output to contract by 1.1% in 2011, a further 3.6% next year, with no growth anticipated before 2014.”
Industry commentator Brian Green offered a more optimistic analysis, noting that previous quarters have seen preliminary GDP figures revised upwards.
“My gut instinct is that the figure might be revised to be a smaller drop”, he said.
However, he echoed fears that the construction sector will fall into recession once public sector work is fully exposed to the impact of government cuts.