UK Construction Sector Sees Unexpected Boost

The purchasing managers index (PMI) for the industry rose to 56.7 in March from 54.3 in February, suggesting that the recovery is on track after the manufacturing sector also saw a pick up.
A slump in the two sectors was seen to be the driving force behind the economic contraction at the end of last year, which raised fears of another recession.
Although the signs are encouraging, “forceful measures” must be used to drive growth that is still too slow, a business lobby group has said.
In its quarterly economic assessment, the British Chambers of Commerce (BCC) said although the UK will likely avoid slipping back into recession, the economy will expand by just 0.6% this year.
This is below the 0.8% predicted by the Office for Budget Responsibility and the BCC warned that growth in the services sector, which makes up more than three-quarters of the economy, has been sluggish.
The group added that growth over the last three months was a welcome improvement on the final quarter of 2011 which had pointed to stagflation – a situation of low growth and high unemployment and inflation.
But the survey of 7,981 businesses revealed that cashflow was still a real problem for many firms, and rising oil and food prices could mean that inflation will fall less quickly than previously thought, the eurozone debt crisis continues to hit confidence.
With unemployment forecast to rise to 2.9 million over the next year, the BCC has called on the Government to take “radical measures” to set businesses free to grow, such as creating a state-backed bank to boost lending to small and medium-sized enterprises (SMEs).
It also suggested scrapping the 5.6% rise in business tax this month which could further exacerbate cashflow problems for many firms, ramping up the credit-easing programme and speeding up the proposed improvements to transport infrastructure.
“The UK economy is still facing huge challenges and the recovery is much too slow. The UK has the potential to recover, but to achieve that the Government has to set businesses free to grow,” director general John Longworth said.
“There must be a greater focus on policies to support growth that will enable businesses to create jobs, invest, and export. As the public sector’s share of economic activity shrinks over the next few years, forceful measures are needed to make it possible for businesses to drive recovery.”
Chief economist David Kern added that every effort must be made to boost growth and empower the private sector to create jobs.
“While the Government perseveres with efforts to cut the deficit, it must reallocate priorities, within the spending envelope, towards growth enhancing policies,” he said.
“Red tape must be cut more aggressively, the credit easing programme must be made more effective, and the MPC must do more to ensure that the huge QE programme encourages increased lending to viable SMEs.”

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