Declining MPA Figures Confirm Need for Urgent Treasury Action to Boost Construction and Infrastructure

MPA data on sales volumes of aggregates, asphalt and concrete in the second quarter show significant declines in all product areas. These materials represent by far the largest element of the construction supply chain and the results are based on recorded sales volumes.

In the second quarter, compared with the same period of 2011, sales of crushed rock and sand and gravel aggregates declined by 10% and 15% respectively and sales of the value added products of ready-mixed concrete and asphalt fell by 13% and 16% respectively.

These figures indicate that for the first half of 2012 sales of crushed rock, sand and gravel, ready mixed concrete and asphalt were 11%, 13%, 12% and 17% down respectively on the first half of 2011.

The aggregates and concrete figures in particular are indicative of a significant decline in construction activity, and particularly new construction activity, during 2012. The rapid decline in asphalt sales reflects a dramatic decline in road construction and road maintenance activity.

The fundamental problem is that with some exceptions, private sector construction has declined this year and the impacts of the reductions in public investment in construction are now being felt in full. Even infrastructure work is declining due to a collapse in road construction over the past twelve months. (ONS data shows road construction in the first quarter of 2012 was over 40% lower than the average level of activity recorded throughout 2010 and 2011).

ONS data on construction output shows a 5.4% reduction in the year to May and the MPA data suggests that second quarter construction output will be well down on 2011.

There are major regional variations apparent, for example ready mixed concrete sales have remained stable this year in London and in some other parts of the South East following the strong growth recorded in 2011, but elsewhere in Great Britain markets are generally extremely depressed.

Commenting on the results, MPA Director of Economics Jerry McLaughlin said "The dire results in the second quarter reflect the general market experience that construction activity has declined significantly in 2012. We are extremely concerned that there are few positive indicators in the market and our industry volumes are likely to decline this year below the levels experienced in the depths of the 2009 recession. We are also expecting further declines in construction and mineral products markets in 2013.

"These trends will inevitably cause construction to be a continuing drag on GDP growth throughout the year and into 2013 unless there is a rapid and significant reversal of cuts in public sector investment in construction. The announcements made by Government to support and encourage private investment in infrastructure projects are welcome and important, but will not have any significant impact on construction activity before 2014. Urgent action is necessary if we want construction to contribute positively to economic recovery over the next 18 months."

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