GB decline continues

The recent decline in Great Britain’s construction output in the three-month on three-month series has continued, with figures from the Office for National Statistics (ONS) showing a drop of 3.4% in April 2018 – the biggest fall seen in this series since August 2012.

Three consecutive months of contraction in the month-on-month series at the start of 2018 has been followed by construction output experiencing a slight bounceback in April 2018, increasing by 0.5%, but this growth was described by the UK’s Construction Products Association (CPA) as “a false positive”.

The ONS found that the three-month on three-month decrease in construction output had been driven by falls in both repair and maintenance (down 3.0%), and new work (down 3.7%).

Claiming to be the UK’s largest independent producer of official statistics and to be the recognised national statistical institute, the ONS said that total construction new orders also decreased in the first quarter of 2018, falling by 4.6% This was, it said, driven by the continued fall in all other work new orders.

The monthly business survey collects output by sector from businesses in the construction industry within Great Britain – the whole of the UK with the exception of Northern Ireland. Output is defined as the amount chargeable to customers for building and civil engineering work done in the relevant period, excluding value added tax (VAT) and payments to sub-contractors.

The CPA pointed out that the ONS figures showed that alongside the other figures, new orders in the first quarter fell 6.6% in annual terms.

Rebecca Larkin, CPA senior economist, said, “The 0.5% rise in April reflects an element of catch-up after the combination of Carillion’s liquidation and the bad weather in February and March.

“This seems like a false positive, however, as output remained weak compared to April last year, with the 3.3% fall equivalent to a £430 million (€487.73 million) reduction in construction work. “

She highlighted the fact that only the private housing and industrial sectors recorded growth, saying that private housing was driven by the traditional spring selling season, and industrial by shorter lead times in factories and warehouses construction.

“The new orders data confirmed an underlying weakness at the start of the year unlikely to be due to the weather,” she said. “Private housing, industrial and public non-housing new orders increased during the first quarter, but large falls in the infrastructure and commercial sectors, which account for almost one-third of total construction, are set to act as a drag on growth.”

Intervention

Unite, the UK’s construction union, has called for urgent government intervention in the construction industry after the publication of the ONS figures.

Assistant general secretary Gail Cartmail said, “The government’s failure to provide proper support to construction has resulted in growth in the industry first stalling, and now dropping.

“The government needs to establish a coherent infrastructure plan which establishes long-term projects throughout the UK, to benefit all regions. Construction is a key part of the economy and a further contraction in the sector will be bad news for the UK’s economic performance.

She said a “sensible infrastructure plan” was vital for the long-term health of construction, and that the correct government policies should benefit other industries including steel, which she said also urgently needed central intervention and support.

“Construction urgently needs a shot in the arm as new orders are plunging. Continuing Brexit uncertainty and the fallout from Carillion’s collapse is destroying confidence in the industry, with projects being delayed or cancelled.”

Cartmail also said that “cut-throat tendering” on projects was making an already bad situation worse.