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Further fall in construction sector

Thursday, 7 August 2008 12:00 AM

More bad news for the construction sector today as figures reveal orders slipped dramatically during the second quarter of the year.

Research from the from the Office for National Statistics (ONS) show total new construction orders fell 7.5 per cent in the second quarter compared to the first and were down 21 per cent year-on-year.

Contained within the figures was news new orders for private housing were particularly weak, slumping by ten per cent quarter-on-quarter and 35.1 per cent over the last year.

In the wider market, private commercial orders declined by 7.1 per cent quarter-on-quarter and 33.4 per cent in the last year.

Infrastructure orders fell by 16.0 per cent quarter-on-quarter in the second quarter, but were up 18.2% year-on-year.

The industry has been badly hit by the credit crunch. With wholesale funds expensive, firms have been unwilling to invest, choking demand for new construction.

The property sector has been particularly affected. With mortgage finance increasingly difficult to obtain, demand has fallen for new property, causing prices to fall and reducing the financial incentive to build.

"There can be little doubt the construction sector is now firmly in recession," explained Howard Archer, chief economist with analysts Global Insight.

"Indeed, with housing market activity and prices continuing to head south, the commercial property sector in dire straits and government finance for infrastructure projects limited, the construction sector looks to be in for an extended, very difficult time.

"This reinforces our belief that the overall economy is more likely than not to contract in the second half of 2008, even allowing for the fact that the construction sector's share of national output is relatively limited at some six per cent."

The news confirms research released earlier this week Construction Managers Index, which reports activity in the industry contracted for a fifth successive month in July.

Chris O'Toole

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