Construction industry frozen in worst slump since winter of 1963

Published 06th Jun 2009

The biggest fall in construction output since Britain was engulfed by the "big freeze" of 1963 led to an even bigger slump in the economy during the first quarter of this year than the 1.9% drop originally estimated, the government signalled today.

City analysts said a 9% fall in a sector that straddles housebuilding, commercial property and repairs to existing buildings would shave a further 0.3 points off GDP in the first three months of the year. A 2.2% drop in GDP would be the weakest since the 2.4% contraction in the autumn of 1979.

In its early estimate of first-quarter GDP, the Office for National Statistics (ONS) had pencilled in a decline of 2.4% in construction output during the winter, but it said todaythat the severity of the recession was greater than in any of the three major postwar downturns in the 1970s, 1980s and 1990s.

The last time building sites were as quiet as during early 2009 was when a blizzard on Boxing Day in 1962 heralded a spell of freezing weather that lasted until early March. Between January and March this year, private housebuilding was down 10% in the first quarter while public housebuilding dipped by 9%. With demand for both residential and commercial property weak, construction output in January to March was 6% lower than in the same months of 2008.

"The 9% drop in construction output now reported is massively more than the 2.4% quarter-on-quarter decline that was contained in the latest national accounts data, which showed that GDP contracted by 1.9% quarter-on-quarter in the first quarter," said Howard Archer of IHS Global Insight. "Although construction output only accounts for 6% of GDP, the ONS has indicated that revised data are likely to show that GDP contraction was 0.3 percentage points higher at 2.2% quarter-on-quarter in the first quarter."

Recent surveys of construction have suggested that the first quarter marked the low point for the sector. The Chartered Institute of Purchasing and Supply/Markit index has risen from a trough of 27.8 in February to 45.9 in May. A reading below 50 indicates contraction in the sector.

The ONS said officials were working on a new estimate of GDP in the first quarter following the release of the construction data.

Source: ' Guardian '

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