Post date: Wednesday, 8th August 2012

Government cuts dampen construction recovery

 

The latest research from industry analyst Glenigan suggests government cuts are stifling any recovery in the construction sector.

Headline figures from the Glenigan Index for the three months to July include:

  • Construction as a whole down 1% for the 12 months to July;
  • Private housebuilding project starts increase 36% for the 3 months to July;
  • Social housing down 22%; negative trend forecast to continue;
  • Non-residential project starts down 3% year on year as weak education and community and amenity projects outweigh growth in office and industrial construction;
  • Civil engineering down 13% year on year as infrastructure and utilities projects slow.

The research suggests declines in government-funded work continue to hold back project starts, offsetting a strengthening in the value of private housing, industrial and commercial projects starting on site.

Allan Wilen, economics director, Glenigan, added: "The cuts in government spending will continue to restrict the number of education and social housing projects coming through the development pipeline.

"Though the level of health projects has remained resilient so far, we expect a shrinking flow of work over the next eighteen months. Less money for new builds could see an increase in refurbishment work next year, with schemes such as the Priority Schools programme promising to provide funds for such work."

Wilen continued: "There will continue to be a high level of infrastructure investment, particularly concentrated in the south of England. Crossrail will continue to provide rail related work, while there may begin to be a lift in spending on the road network.

"More growth is predicted for the commercial sectors, though the strength of any sustained recovery depends on economic prospects, both in the UK and abroad. The increase in private housing building seen during the year to date will slow over the remainder of the year.

"Whilst we expect 2012 to be a growth year, poor household earnings growth and weak house prices will dampen the pace of recovery in the value of starts."

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