Construction rise fails to compensate for slump

The total volume of all new construction orders in the third quarter of 2012 was estimated to be 6.7 per cent lower than the same period a year previously, the Office for National Statistics said.

Howard Archer, Chief UK and European Economist at IHS Global Insight, said the 5.4 per cent quarter-on quarter rise in orders may look impressive, but it “masks a still very weak looking picture for the construction sector”.

He added that the rise “substantially failed to offset” the 9.2 per cent quarter-on-quarter plunge in orders suffered in the second quarter.

Dr Archer said: “Putting it further into perspective, construction orders in the third quarter of 2012 were down by 43.5 per cent from the peak level in the second quarter of 2007.

“The gain in construction orders in the third quarter was driven by a 31.4 per cent quarter-on-quarter and 43.8 per cent year-on-year jump in infrastructure orders.”

In contrast, there were falls in orders for private housing, 1.6 per cent quarter-on-quarter and 5.7 per cent year-on-year, and, especially, private commercial work, 6.7 per cent quarter-on-quarter and 35.1 per cent year-on-year, he said.

Dr Archer added: “Even if the construction sector can avoid further contraction in the fourth quarter, it certainly looks unrealistic to expect it to materially contribute to growth.

“The construction sector continues to be hampered by major headwinds, notably including reduced public investment and spending, an extended weak economy, a struggling housing sector, and problems in getting funding for large-scale projects.”