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UK climbs out of recession but construction plunge continues

The UK economy grew by one per cent in the three months from July to September while the construction sector continued to contract

Government statistics revealed today show the nation’s GDP is back on the rise after three succession quarters of contraction, officially ending the recession.

Olympic and Paralympic ticket sales were praised for adding 0.2 per cent extra to the UK’s economic output.

Production industries were up 1.1 per cent compared to a 0.7 per cent decrease in the second quarter while services grew 1.3 per cent following a 0.1 per cent fall.

Sector by sector: UK Q3 2012 GDP

Source: ONS

Sector by sector: UK Q3 2012 GDP

However construction output fell 2.5 per cent in the three months from July to September following a 3.0 per cent decline in the previous quarter.

Output in August was 11.6 per cent lower than the same time a year ago.  New work saw the biggest tumble in the period, falling 15.6 per cent compared to a year earlier.

Public new housing and public other new work were both down 20 per cent. Infrastructure and private new housing fell 18.4 and 12.1 per cent respectively.

Jonathan Hook, construction leader at PwC, said: ‘The decline in construction output of 2.5 per cent is disappointing but not unexpected.

‘The industry is feeling the impact of cuts to the Government’s capital programme. Government has got the message about stimulating projects and the potential impact on economic growth and there are also increasingly positive signs from the private sector, but it will probably be a year before the sector starts to see growth again.’

Ian Davies, director of DLP Design said: ‘While it has been very difficult over the last four years, the number of projects is increasing. We have got a long way to go. It’s certainly difficult to make a profit, profitability is the biggest issue.’

Chris Williamson of Weston Williamson argued reducing VAT would help boost the construction industry.

Commenting on the government’s latest bid to boost housing by further reforming the planning system, he said: ‘Allowing huge extensions in back gardens is certainly not the answer and smacks of desperation’.

Peter Gamble of Holder Matthias said from his perspective the economy was better than in 2008 but performance over the past nine months had been ‘relatively weak’.

Commenting on the immediate prospects for recovery in the construction sector, he said: ‘There will be quite a long lead in as projects which Architects are now starting work through. Whilst some projects re-starting might provide initial relief I would be surprised to see construction output start to grow within the next six to nine months.’

Gamble called on the government to increase the availability of bank credit.

GSS partner Tom Lyons said: ‘The financial climate has resulted in reduced values and elements of the profession still working for fees that cannot be sustained or deliver an appropriate level of service. 

He added: ’Although recent figures do show construction to be down, we are certainly seeing more activity at the early design and feasibility stage, some of which is related to the previously announced spending on education starting to turn into real projects.  We do expect this trend to continue but it will be a very slow recovery for the industry. 

‘What is very important is that the government and other commissioners of buildings recognise the skills and training of the architectural profession in delivering creative solutions to briefs.  When the brief is there “isn’t much money” then the response should not be how cheaply can we build but how can we develop a design in a collaborative way to deliver the appropriate quality a “more for less” solution.’

ADP chair Roger FitzGerald said: ‘We’ve been seeing a slow, but steady, improvement from the beginning of this year. Some Government-led stimulation of the regions, especially the north-east, would be good.It’s fragile, it’s gradual, but at least the trend is in the right direction.’

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