Fall in GB output

11 March 2016

Output in the construction industry in Great Britain fell in January 2016 compared to December 2015, and also compared to January 2015.

Figures from the Office for National Statistics (ONS) show that output decreased by 0.2% compared with December 2015. All new work fell by 0.8% while all repair and maintenance (R&M) increased by 0.8%.

Within all new work, there was a decrease in public new housing of 10.6% and infrastructure dropped 8.6%. These falls were offset by increases in private commercial of 4.7%, public other new work up 1.6%, private industrial up 0.7%, and private new housing which rose by 0.6%.

Within the R&M category, housing repair and maintenance increased by 3.0%, while there was a decrease of 1.5% in non-housing repair and maintenance.

Compared with January 2015, output in the construction industry decreased by 0.8%. There were decreases in all new work of 0.4%, and R&M of 1.4%.

New orders for the construction industry in the fourth quarter (Oct to Dec) 2015 were estimated to have decreased by 0.5% compared with the third quarter (July to Sept) 2015. There was an increase, however, of 1.4% compared with the fourth quarter of 2014.

Output is defined by the ONS as the amount charged by construction companies to customers for the value of work (produced during the reporting period) excluding VAT and payments to sub-contractors.

Professor Noble Francis, economics director at the UK’s Construction Products Association, said, “The fall in the ONS’s construction output in January was disappointing but largely reflects the impact of poor weather at the start of the year with floods in many parts of the country.

“In addition, skills shortages in sectors such as house building have meant that project costs have risen and affected the viability of sites.”

He said the fall in output was expected to be a temporary, however.

“The ONS’s construction new orders data suggest that activity should increase significantly during 2016. Although new orders in the fourth quarter were 0.5% lower than in the third quarter, they were still 1.4% higher than a year ago.

“Furthermore, new orders can be volatile, so it is better to look at the data within the context of the year as a whole. New orders in 2015 were 2.8% higher than in 2014.”

Increase in 2016

Professor Francis said that Construction Products Association forecasts suggested that output would increase 3.6% in 2016, with growth in the three largest sectors of construction – private housing, commercial and infrastructure.

“Nevertheless, while fundamentals such as projects in the pipeline remain good, the risks around the forecast are quite high due to skills shortages, concern about the delivery of major projects like Hinkley Point C, and increased uncertainty for investors owing to the EU referendum.”

The £18 billion (€23.2 billion) Hinkley Point nuclear reactor project in the UK has been in the news with warnings the investment could prove risky.

The UK’s EU referendum, to be held in June, was cited as a factor in the latest ONS figures by Michael Thirkettle, chief executive of interdisciplinary international construction and property consultancy McBains Cooper.

He said, “Today’s figures show a second successive fall in output, which is bad news not only for the construction industry but also for the government’s housing targets and those desperate to get on the property ladder.”

He said that uncertainty about Britain’s future in the EU was delaying investment decisions, which was dampening the market.

“At the same time, the sector is desperately short of skilled workers – particularly bricklayers, carpenters and electricians.

“If the UK leaves the EU, construction companies fear they would lose access to the pool of skills from Europe that they are relying on – making a bad situation worse.”

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