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Construction decline likely to continue throughout 2010

DESPITE recent favourable Office for National Statistics figures, the construction industry is facing a further decline in output in the second half of 2010, according to the latest Construction Trade Survey published by the Construction Products Association. This follows last year’s sharpest fall in 35 years.

According to the survey, building and civils contractors experienced falls in output in both the first and second quarter of 2010, while all sectors of the industry are reporting poor sales, order books and enquiries.

Although product manufacturers experienced a rise in sales in the second quarter, the forward picture is very uncertain, says the Association.

Both light- and heavy-side manufacturers are seeing a mixed picture, with 61% of heavy-side manufacturers anticipating no change or a fall in sales in the second half of the year, highlighting the uncertainty surrounding the recovery in the housing market and the speed and extent to which public sector cuts will impact upon construction.

Commenting on the survey, Noble Francis, economics director at the Construction Products Association, said: ‘Over the next few years, construction is braced for a fall in public sector investment and will increasingly need to look to the private sector for growth.

‘It is critical that capital investment is focused on those areas such transport, energy, and other key infrastructure projects, that will do most to stimulate the wider economic recovery.’

Julia Evans, chief executive of the National Federation of Builders, added that the industry’s rush to finalize schools projects before spending was cut, as well as the need to play catch-up following the severe weather in the early part of the year, had provided impressive headline growth figures.

But she warned that the underlying picture is not so bright. ‘Factors such as flat mortgage lending, lower levels of lending to construction companies and a planning system in transition put any tentative signs of growth at risk,’ she said.

‘Given the significant contribution that construction made to the overall growth in UK GDP in the second quarter of 2010, we can only hope the Government takes into account the resulting benefit to the wider economy of a sustained, and sustainable, level of investment in construction when it makes further decisions on spending.’

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