British construction sector’s continued fall threatens UK growth

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Britain’s construction sector has spent its fifth consecutive quarter stuck in the mire, official data yesterday confirmed, with industry leaders warning of a threat to the wider economic recovery.

Although the UK bounced out of recession in the third quarter, growing by a stronger-than-expected 1 per cent, weak economic data since then had made some analysts concerned that the Q3 growth figure could be revised lower.

Recent manufacturing surveys have highlighted renewed weakness with companies reporting a drop in export orders in October as the eurozone – Britain’s largest export market – teeters on the brink of recession.

Falling construction output has been the main drag on gross domestic product (GDP) this year, and figures yesterday reinforced this trend, with output falling to its lowest level since 1999 in the third quarter. The 2.6 per cent decline was slightly worse than the 2.5 per cent fall factored into last month’s third-quarter GDP estimates.

Michael Levack, chief executive of the Scottish Building Federation, said the deepening crisis in the industry was placing recovery in the wider economy at risk.

“A healthy construction industry is a key pillar of a healthy economy,” he said. “A further drop in building output should set the alarm bells ringing.”

Steve McGuckin, UK managing director of management consultancy Turner & Townsend, added: “The economy as a whole might be on the road to recovery, but the construction sector is stuck in reverse.”

The official data did contain some better news on Britain’s trade standing with the rest of the world. Its overall trade deficit, which includes the more buoyant trade in services, narrowed to £2.7 billion, from £4.3bn in August.