Construction sector recession to ease in H2 - analysts

LONDON Mon Jun 13, 2011 1:02am BST

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LONDON (Reuters) - Tentative signs of a recovery in private sector work may ease the pain of a double-dip recession in the UK construction industry in the wake of severe government spending cuts at the end of 2010.

"The underlying trend should brighten a little bit (in the second half)," Allan Wilen, economics director at construction industry analyst Glenigan, told Reuters.

Construction output, which was one of the biggest drags on growth in the first three months of this year, fell by 13.8 percent on the month in April, according to unadjusted data published by the ONS on Friday.

Analysts, although unconvinced that the official numbers tally with the picture conveyed by sentiment indicators, said the downturn may have hit the bottom.

"Construction output was up by 5.5 percent in the three months to April compared to the three months to January," said Howard Archer at Global Insight.

"This supports hopes that the second quarter will see expansion in construction output and a positive contribution to GDP," he added.

Data from the latest RICS Construction Survey suggested further optimism as private sector workloads are expected to edge upwards and greenshoots of activity in the private sector emerge.

Commercial property planning approvals in England jumped 16 percent in the last quarter of 2010, the latest data available, from the previous year, according to law firm EMW on Monday.

Nonetheless, new data also published on Monday showed that the value of projects starting on site in the three months to May was 21 percent lower compared with a year ago, according to Glenigan. Many sectors such as affordable housing, health and education impacted by cuts, while the private sector performance remains in the doldrums.

The underlying value of residential construction starts was 31 percent lower.

"We've got a 6 percent fall for the current year, it's very much a double dip for construction," said Wilen.

Despite tentative signs of a recovery in privately funded projects, there is still a gap before the recovery in commercial property and private housing will offset the slump in public sector work.

"On the commercial side, there has been an upturn of things coming through at the design phase, but we've got a work load gap," said Wilen, adding there was a similar situation with housing, where a recovery is not predicted until 2012.

(Reporting by Lorraine Turner)

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