The construction sector may finally be emerging from a deep recession
(08/12/2009)

The Statistical Bulletin brings together information on the output of the construction industry in Great Britain. According to the ONS Construction Output data for Q3 2009, the total volume of construction output in the third quarter of 2009 rose by 2 per cent compared with the second quarter of 2009. The rise in repair and maintenance of 10 per cent was off set by a fall in new work of 4 per cent. The total volume of construction output in the 12 months to the third quarter of 2009 fell by 11 per cent compared with the previous 12 month period.

The total volume of new work in the 12 months to the third quarter of 2009 was 12 per cent lower compared with the previous 12 months and was 4 per cent lower in the third quarter when compared with the previous quarter. The total volume of repair and maintenance work fell by 8 per cent in the 12 months to the third quarter of 2009 compared with the previous 12 months but was 10 per cent higher in the third quarter of 2009 compared with the previous quarter.

RICS chief economist Simon Rubinsohn commented: "Data released by the ONS shows, on the face of it, the construction sector to be emerging from a deep recession. However the 2 percent gain in the headline output number in the third quarter masks a significant divergence between new build and repair and maintenance work. While output of the former continues to slip, the latter has now increased for two consecutive quarters. Output of new work dropped a further 4 percent in the third quarter and is now almost 18 percent below the high reached in the first quarter of 2008. The contribution from private housing and commercial developments was particularly disappointing, demonstrating the continuing problems facing the industry as a result of a lack of development finance.

"On the other hand, repair and maintenance work jumped 10 percent. Even so output in this area is still 7 percent down on the peak. The sharp rise in repair and maintenance activity is partly a reflection of the collapse in new build, with owners of property increasingly looking to make good and extend the life of existing buildings. The lack of new starts suggests that the onus on improving the existing stock will continue to be a key feature of the construction market for some time to come.

"To encourage this further, RICS believes there is a strong case for reducing VAT to 5 percent for repair and maintenance work. Without this additional support, and with finance still in short supply, the risk is that the construction industry will continue to languish and good quality property will become increasing hard to find."