If the Government wants to a boost from construction it better be quick about it

If the Government wants to a boost from construction it better be quick about it

The latest official figures on economic growth are not encouraging.

They are better than some feared. But the data all point to very weak growth once a host of special factors are taken into account and the general pattern is considered.

The official statisticians at ONS suggest it is better to look at the second and third quarter GDP growth figures combined to get a better picture of the economic activity. That would put average quarterly growth of about 0.3%.

That weak level of growth, from where we are, supports those who are arguing that the UK’s economic engine is losing power and action needs to be taken.

This argument is not lost on the Government. Its rhetoric is increasingly about growth and how it will be achieved.

For those in construction this strikes a welcome tone. The issue then is one of how the Government’s rhetoric might translate into action.

Here the problems pile up. Much of the Government thinking on boosting growth, improvements to planning, cutting red tape and, indeed, boosting the infrastructure, looks a bit long term.

For construction the worries are pretty immediate.

It would be silly to read too much into the third quarter estimate for construction growth of minus 0.6%.

The data have been erratic of late, with a couple of nasty quarterly falls late last year and early this year followed by a 1.1% rise in the second quarter of this year.

So if we looked at the construction figures over two quarters it would put the average quarterly growth positive at a shade over 0.25%.

Extracting meaning from the data is further confused because of revisions. On the basis of past revisions and the process the ONS has in place, it is very possible that the revisions to the latest figures for construction output will be upward.

However, taking all this into account, the picture painted by this set of numbers and the wealth of other construction data is one of an industry heading once again into a recession.

The word on the street, so to speak, is that the industry is beginning to feel more acutely the cuts in public funding. Many of the large projects let during the latter days of the previous Government will be coming to a close. And the private sector recovery is weaker than many hoped and expected.

This all points to an increasing possibility of a nasty drop in construction work in the relatively near future.

This prospect has not escaped the attention of construction firms or their bankers. We are beginning to see more layoffs and company collapses.

This ultimately damages the fabric of the industry.

So if the Government is serious about using construction to help propel economic growth, it should act with greater haste and target projects that will have more instant impact.

Sadly such work is not the type that lends itself to PR events with scissors and ribbons.

Leave a Reply

Your email address will not be published. Required fields are marked *