UK Construction falls sharply as Coalition urged to do more

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By Martin Kelly

The construction sector in the UK has contracted sharply over the last twelve months according to the latest official figures.

The Office of National Statistics (ONS), said the sector saw a fall of 6.3% compared to May last year.  The decline was driven partly by UK Government public spending cuts which saw public works fall by 22%.

According to figures released by the ONS, new housing work is down 22.9%, non-housing work is down 21.5% and infrastructure work is down 21.3%.  Between March and May construction output fell 7.4 percent compared to the same three months in 2011.

The lack of growth in the sector was cited as the man reason the UK fell back into recession in April after the UK’s economy shrank for the second successive quarter.

Figures published in May revealed that the recession in the UK economy was actually far worse than originally feared.  Between January and March this year, gross domestic product shrank by 0.3%, worse than the previous estimate of 0.2%.  

The revised figures were published just one week after Christine Lagarde, head of the International Monetary Fund, said that the Chancellor George Osborne should consider a new tactic in order to boost the economy, and increase focus of public investment in infrastructure projects.

Ms Lagarde’s call echoed those of the SNP and others, who for months have called on the Chancellor to adopt a “plan MacB”, and to increase public expenditure in key areas as a means of promoting economic growth.

The SNP has consistently called for an injection of capital spending to help boost the economy and have listed 30 ‘shovel ready’ projects that could create over 4000 jobs in Scotland.

The calls by the Scottish Government were this week echoed by the Scottish Chambers of Commerce who have called on the UK Government to act in the face of signs of a growing lack of confidence.

Garry Clark, Head of Policy and Public Affairs at Scottish Chambers of Commerce, said:

“Our latest survey suggests that many Scottish businesses have had a weaker second quarter and are more cautious as to the remainder of 2012.  The optimism evident at the beginning of 2012 is less evident now, and the signs, both internationally and at home, are of a slowdown and return to negative growth.  With few exceptions demand, and both consumer and business confidence, remain weak and the outlook for the rest of the year is one of little or no growth.

Mr Clark added:

“Construction businesses continue to perform below expectations, despite the continued and welcome efforts by the Scottish Government to maintain and extend levels of capital spending in our economy.  It is clear that the additional stimulus of infrastructure spending must be backed up with action to ensure that Scottish based businesses are able to reap the maximum possible benefit from these new contracts.”

He said the recovery remained tentative and uncertain and called on more support to encourage recovery.

“The Scottish Government has led the way in identifying increased capital spending as an important policy in helping to address economic stagnation and it is now time for the UK Government to act boldly to stimulate demand and to reduce the focus on austerity; the evidence clearly shows that the current mix of policies of mainly austerity and limited support for growth is holding back any economic recovery.  The Government’s economic plan needs to move to a new phase focused on growth”