UK: declining construction and aggregates trends highlight need for investment to boost construction activity

MPA survey results for the third quarter indicate that overall sector demand was relatively flat compared with the same quarter of 2010. In the early part of the year there was growth in aggregates, asphalt, cement and concrete markets but this growth has slowed down in the second and third quarters.

Overall aggregates sales in the third quarter were 5% lower than the third quarter of 2010, although cement and concrete sales were 1% and 2% higher respectively. For the year to date aggregates sales are 1% down on 2010, asphalt 2% up and cement and concrete sales 5% and 7% up respectively, mainly as a result of increased activity in London and the South East.

Commenting on the results Nigel Jackson, Chief Executive MPA, said: “Whilst we welcomed growth in industry markets in the early part of 2011 it must be recognised that this improvement was from 2010 markets, which remained  between 16% and 39% below pre-recession levels. The concern has been whether this improvement could be sustained. Volumes of asphalt, cement and concrete have been sustained over the second and third quarters but the declining aggregates trend is an indication that overall construction and mineral products are likely to decline significantly during 2012. The latest GDP figures suggest that whilst construction output increased by 6% in the first quarter of 2011 it was followed by 2% and 4% declines in the second and third quarters – all compared with the same periods of 2010.

The improvement in concrete demand in 2011 has been largely due to a 50% increase in demand in London and growth elsewhere in the South East – markets elsewhere in GB have been uneven and generally sluggish. As indicated in the official construction output figures, which show that public non-housing construction was only 2% lower in the first eight months of 2011 compared with 2010, the significant reduction in public investment announced by Government in 2010 has taken some time to impact on construction and mineral products markets. Local authorities, for example, have managed to sustain spending on road maintenance work, but this will become increasingly difficult as spending constraints bite.

Jackson concluded, “Given the evidence that construction markets may again be heading for recession in 2012 and the negative impact that this will have on total economic activity, we believe that it is essential that Government takes urgent action to boost construction by accelerating investment in areas of outstanding need, such as our transport and energy infrastructure and housing. We understand that public finances are severely constrained but there is also a fundamental lack of demand in the economy to be addressed.

“Government has acknowledged that the country needs £200 billion of infrastructure investment and we really need to see a far greater sense of urgency about leveraging funding into these areas quickly. There is a critical need to stop talking about our infrastructure deficit and start doing something about this now in addition to those measures already planned and announced. A boost for construction is not the sole solution to our economic difficulties but it would make a really positive contribution to stimulating both short and long term growth.”

Read the article online at: https://www.worldcement.com/europe-cis/07112011/uk_declining_construction_and_aggregates_trends/