So, we have not dipped back into recession … just. The economy has essentially flatlined for the last six months, with growth of 0.5% in the first three months of 2011 following a contraction by the same amount in the final quarter of last year.
However, as the national media highlighted this week, construction was down by 4.7% at the start of 2011. It was also one of the worst hit sectors at the end of 2010.
On Tuesday, the day before the ONS figures were released, the Construction Industry Council (CIC) held its third Economic and Policy Forum at the Building Centre in London. The CIC brings together the industry’s professional bodies, research organisations and specialist trade associations.
Those attending the forum heard Allan Wilen, Economics Director and Head of Market Intelligence at market data firm Glenigans, argue that we need growth of 2% in the wider economy for construction to expand.
The reliance of the UK construction industry on public sector capital investment is an inherent weakness and the aim of the coalition Government to rebalance the economy away from public spending will only make it more difficult for construction to recover. Wilen summarised the situation – a public sector squeeze as capital funding is cut; a slow private sector recovery, hampered by access to capital and consumer caution.
But construction is not just new build. The theme running through most presentations on the sector these days is the switch to refurbishment and maintenance. In the education sector, for example, maintenance work delayed in expectation of the Building Schools for the Future programme delivering new facilities will now need to be done and urgently. Demographics are putting pressure on classroom space, with a forecast 10% increase over the next four years in demand for primary school places.
Of course, local authorities are being squeezed and there will be a temptation to limit expenditure on maintenance to protect revenue budgets for “frontline” services, storing up more problems for the future.
The CIC’s main concern is the loss of skilled resources. In a press release issued in response to yesterday’s GDP figures it said: “The recession of the late 1980s/early 1990s took 500,000 people out of the industry and led to eighteen years of skills shortages.”
It is notoriously difficult to synchronise training programmes with economic cycles but it is clear that the UK needs to rebalance construction training, away from new build towards retrofit and maintenance. This would ensure we have the skills to keep the UK’s infrastructure running and to carry out the work necessary for a low carbon future.