Gloomy construction figures could drag GDP down further

Statisticians have cut their estimate for construction output and in doing so heightened fears that Britain’s slide back into recession may be worse than first thought.

Gloomy figures from the building trade will have a negative effect of about 0.1 per cent on GDP in the first quarter of 2012, meaning the contraction of 0.2 per cent could become 0.3 per cent, the Office for National Statistics (ONS) figures suggest.

Other sectors of the economy could yet save the GDP figures from being revised downwards. However, economists believe the poor construction data has dashed hopes the overall figures will be revised to levels predicted in more optimistic surveys.

The total volume of construction output dropped by 4.8 per cent in the second quarter, compared to the previous three-month period, while it was down three per cent on the previous estimate. Infrastructure fell away by 15.9 per cent.

A spokeswoman for the National Federation of Builders said trade in London would be “slightly more robust” but not immune to the gloomy outlook.

“London is always slightly more resilient, as you know that there is a traditional north-south disparity.

“However, London is still not impermeable to the general economic conditions we are all facing and whilst property is holding its own in terms of demand and investment, construction firms – particularly SMEs – are subject to the same challenges on lending as elsewhere.

“The work in London is possibly more robust, however the industry would welcome and benefit from government policies that would enable it to regain its position as a traditional provider of eight per cent of GDP.”

More can be done to help construction firms through the difficult economic times, the spokeswoman added.

“It has come as no real surprise given that we have been speaking about the drivers for growth not being in place.

“These include ineffective lending schemes such as Project Merlin, the National Loan Guarantee Scheme and NewBuy, all schemes which were claimed would help SMEs in house building and construction but are appearing to do little to help the viable smaller companies that the government itself is looking towards to provide growth.

“Our members are talking about red tape and having no help with creating demand among consumers, such as a cut in VAT to five per cent for home improvements.”