The UK construction industry has witnessed a fall of nearly two percent in construction activity during 2010 compared with last year's 12 per cent drop and is expected to remain in recession. It is estimated that by the end of 2010, construction industry will have lost 16 billion of work in just three years and the growth is not expected to return until 2011 and even then it is forecasted to be relatively subdued at just one per cent per year in the consecutive three years coming. An interesting factor to be observed here is regarding the private Vs public construction companies' progress.
Over the past one and half year, private sector construction fell by almost 20 percent, losing approximately 14bn of work and a further fall of four per cent is anticipated during 2010. However, the public sector construction, on the other hand, rose due to government's fiscal stimulus and contractors on government frameworks were able to take advantage of some of the falls experienced from the private sector. There are high chances that this trend is set to reverse in the near term as a result of economic recovery set to lead to a rise in construction funded by the private sector. On the other hand, the state of the public finances is likely to lead to a deep fall in public spending on construction. Critical fact lies in spending on public schools and housing, as well as on energy and transport infrastructure and they are not cut sharply, otherwise recovery for the construction industry might be delayed and consequently, the economic recovery in the UK might be severely hindered.
Following are some of the points highlighted in the forecast report produced by Construction Products Association (CPA)
1. With some new contracts signed, in addition to existing work brought forward through government's fiscal stimulus, orders rose 60 per cent during 2009 and although the number of roads projects signed in the last first quarter of 2010 has remained broadly flat compared to one year ago, the value of these projects has increased fourfold
2. Budget 2010 also provided an extra 285m for the managed motorways program
3. New orders rose 165 per cent during 2009 as water companies signed framework contracts for the whole spending period in advance
4. Rail only accounted for 20 per cent of infrastructure output during 2009, yet the sub-sector is set to enjoy a five-year period of growth that will see it become the largest infrastructure sub-sector
5. Despite the pessimistic forecasts, the association predicts work will increase in some sectors, such as private house building, where a growth of 32 per cent is expected between 2010 and 2012. In addition, construction activity is forecast to be boosted by infrastructure work in the regulated sectors of rail, water and energy
In spite of the recovery features which reveal the signs of improvement recorded at the turn of the year, it has been anticipated by most of the observers that any recovery will be slow and prolonged. The current upswing will be fuelled by temporary factors such as time-bound fiscal stimulus and the effect of inventory cycle. Factors such as high unemployment, low investment and public-sector retrenchment may lead to a sustained period of relatively low growth in developed countries. There are quite a few potential chances of the risk that a double dip recession could still take place in the form of