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Reaction to the output figures

Steve McGuckin, managing director of the construction and programme management consultancy Turner & Townsend, said:鈥滱ll the sunshine and Olympic feelgood factor in the world can鈥檛 hide the fact that these are black days for the construction sector. Stagnation has moved from the stuff of nightmares to the new norm.

鈥淒espite Sir Mervyn King鈥檚 assertion this week that the economy is 鈥榮lowly healing鈥� - construction is still walking wounded. Output in the last quarter tumbled to levels not seen since the depths of the 2009 recession. The big drop in infrastructure output is of particular concern for the economy as a whole.

鈥淢any in the industry had hoped that if they could just limp through 2012, next year would be better. But with the sector continuing to contract, the optimists are being forced into a drastic rethink.

鈥淭he pressure is causing a schism between the sector鈥檚 limited number of big players who have a strong balance sheet and the capability to deliver the big projects, and the small and medium-sized firms who are being squeezed by ever-greater competition.

鈥淎s a result those in the middle ground are having to slash margins to negligible levels - and in the most extreme cases, some firms are pitching for work at below cost, simply to keep cash-flow coming in.

鈥淪uch desperate measures are clearly unsustainable, and the industry as a whole is having to adapt to a tough environment which is still showing no sign of improving.鈥�

The Civil Engineering Contractors Association (CECA) said the figures signalled 鈥渁 looming infrastructure crunch鈥�

CECA said the fall in infrastructure outputfor the second consecutive quarter, reflected the findings of CECA鈥檚 Workload Trends Survey, which showed that any fledgling recovery in the infrastructure sector had been stamped out, with a second consecutive quarter of declining workload.

CECA director of external affairs Alasdair Reisner said: 鈥淭hese alarming figures reinforce fears over the prospects for the infrastructure sector.

鈥淲hile we welcome steps taken to support the long-term pipeline of major projects, there is a pressing need to stimulate activity on the ground now.

鈥淲e need action from government to release shovel-ready activity in infrastructure maintenance and minor works. We also need to see a break in the log-jam that is preventing private investment from flowing into infrastructure.鈥�

Simon Rubinsohn, RICS chief economist, said: 鈥淐onstruction output has now fallen in each of the last four quarters dragging the total volume of work down to its lowest point since the fourth quarter of 2009.

鈥淭he fact that construction output is now barely above the low point for the cycle demonstrates the on-going crisis in the sector. The squeeze in public spending is being compounded by a worsening picture in the private sector with business confidence fragile and development finance in short supply.

鈥淕overnment measures to support the sector have so far delivered little and it remains to be seen whether the latest guarantee scheme for stalled projects will be anymore successful.

鈥淢oreover, with the Bank of England also now recognising the likelihood that the economy will record no growth whatsoever this year, the case for heeding the advice of the IMF is growing stronger.

鈥淎 more modest pace of fiscal adjustment underpinned by a higher level of higher infrastructure spending has the potential to play a critical role in supporting growth in the economy in 2013.鈥�

Simon Rawlinson, EC Harris head of strategic research & insight, said: 鈥淎lthough today鈥檚 ONS figures have revealed things are not quite as bad as initially feared, the outlook still remains grim for the rest of the year.

鈥淲hilst this picture is pretty much gloomy across the board, the most pressing concern is the continued drop in infrastructure output figures which are shrinking far faster than was originally forecast.

鈥淎nalysts will be anxiously looking for improved output from infrastructure in July and August to confirm that one off factors such as weather and the Jubilee have had a hand in very poor second quarter data.

鈥淏ased on the half year output to date the forecasts made earlier in the year that, in 2012, new work output would contract by -5% to -7% look depressing realistic. If this picture continues over the next two quarters then 2012 will be remembered as an outstandingly poor year for the construction industry鈥�

Noble Francis, Construction Products Association economics director, said: 鈥楲ooking at these figures, it is very hard to find anything positive to say in any part of construction. Across the 12 different construction indices, only one, non housing repair and maintenance, shows any growth at all and that at just 0.8% year on year and 0.1% quarter on quarter.

鈥淗owever, what is most concerning is that private sector activity has also fallen sharply, implying that not just activity but also confidence is sadly lacking.

鈥淭his situation is rapidly becoming a crisis and at this rate I wouldn鈥檛 be surprised if manufacturers begin to shut down their operations and lay people off.

鈥淭here is an urgent need for government to address this situation by immediately embarking on a programme of repair and maintenance across all areas of the country, especially for housing and roads, clarifying the model by which private finance will be attracted to enable investment in major infrastructure projects and deciding government priorities for the amount of capital investment the country needs to stimulate growth.

鈥淲ithout these measures recovery is unlikely to happen anytime soon.鈥�

Mark Farrar, chief Executive of CITB-ConstructionSkills, said: 鈥淭he new ONS construction output figures show a continuing trend for the construction industry - times are tough and there is no sign of a change in fortunes.

鈥淥ne of the most frustrating things about today鈥檚 announcement is the slump in the volume of repair and maintenance work. With 26 million energy inefficient homes in the UK, the retro-fitting of green technology to improve environmental performance is a huge opportunity to provide an immediate financial injection to the industry - but this opportunity remains untapped.

鈥淭oday we are calling on government to take swift action to support the industry and to invest in construction as a route out of recession. Each 拢1 invested in the sector returns 拢2.84 to the wider economy, so it has the ability to transform the financial fortunes of the whole country.鈥�