Public sector building slump raises double-dip fears
A SHARP drop in public sector building activity caused commercial development to fall to the lowest monthly level in nearly a year in June, according to property advisor Savills.
The company said its Commercial Development Activity Index showed a net balance of minus 2.8 percent in June, the lowest reading in 11 months, down from an increase of 4.1 per cent in May.
The negative data raises the spectre of double-dip recession.
Michael Pillow, head of Building Consultancy at Savills said: “Public sector austerity measures are now firmly impacting on the development market, with development activity for public sector clients now in double-dip territory.”
Public sector development activity has declined for the last four months.
Savills said public sector development activity had a net balance of minus 28.6 per cent – the largest decline since January 2009 – due to austerity measures introduced by the government.
On June 22, the new coalition government unveiled a pack of measures aimed at shrinking the ballooning deficit.
Cancelled projects include the ousted Labour government’s Building Schools for the Future project, which planned to rebuild or refurbish 1,400 schools in England.
Further flagging woes in the UK development industry, insolvency specialists Begbies Traynor said on Thursday the number of UK construction companies in trouble has hit historically high levels, with slashing of public spending likely to send the sector further into the red.
The Savills data supports a recent Euroconstruct report predicting that European construction output will not return to positive territory until 2011.
There is only a “modest degree of optimism that business activity will rise in the next three months,” said the Savills report, drawn from a monthly questionnaire given to building contractors and developers.
Private sector development in the UK partly offset the decline in public sector activity, posting its 11th consecutive month of growth at 10.6 per cent, said Savills.
The biggest gains were posted in refurbishment and industrial/warehouse development at 9.0 per cent and 8.8 per cent respectively. Developers