Hopes and fears for UK and Great Britain

12 April 2017

Construction output in Great Britain has shown quarter-on-quarter growth, but February figures recorded a fall over the previous month, according to figures from the Office for National Statistics (ONS).

Meanwhile, the UK’s Construction Products Association (CPA) is looking at a long-term upward trend in its latest report.

While both bodies recorded growth in the fourth quarter of 2016 and expressed some Brexit concerns, the ONS offered a markedly less optimistic outlook than the CPA.

Looking at the construction industry for Great Britain, figures recently published by the ONS show a quarter-on-quarter growth in output of 1.5%, but this is contrasted with a 1.7% drop between January and February.

On the back of strong growth in January 2017, infrastructure provided one of the main downward pressures on output in February, with a 7.3% decrease recorded by the ONS.

New housing also contributed to the monthly decrease in overall output, according to the ONS, falling month-on-month by 2.6% in February.

For repair and maintenance, February was a month of growth however. The ONS figures showed an increase of 1.2% month-on-month, 2.6% over the same month last year, and 0.6% quarter-on-quarter.

The fall in output is “more bad news for this vital British industry”, according to Michael Thirkettle, chief executive of interdisciplinary international construction and property consultancy McBains Cooper. Following hot on the heels of the latest Markit/CIPS survey, he said it showed “that a weaker housing sector has led to a slowdown in activity across UK construction”.

Although he said that Brexit had not led to the issues many had feared, Thirkettle predicted a less positive future, pointing to the fact that a significant proportion of UK construction workers were from the EU.

He said, “With a prospect of acrimonious divorce negotiations with the 27 EU countries taking place over the next two years and no promise of freedom of movement being retained, many of these workers could decide to head home for good.

“This would be disastrous for UK projects, not least the government’s ambitious housebuilding targets.”

On the other hand, looking at the latest State of Trade Survey, published by the CPA and representing the UK’s manufacturers and distributors of construction products and materials, the increase in sales and activity for the UK construction product manufacturers in the first quarter of 2017 is taken to be part of a longer-term upward trend that looks set to continue.

It found that the industry’s period of growth now stood at four years, despite a backdrop of increasing input cost pressures.

On an annual basis, 65% of heavy side firms – that supply products such as steel, timber and concrete – reported an increase in sales during the first quarter. For light side firms – supplying things like insulation, boilers and glass – a smaller percentage of 38% reported an increase.

A rise in costs was reported by 73% of heavy side manufacturers and 80% of light side manufacturers, with input costs for raw materials, fuel and energy apparently exerting the greatest pressures. This was largely attributed to the depreciation in Sterling during 2016.

That said, manufacturers were said to envisage a continued rise in activity in the second quarter of 2017.

For Rebecca Larkin, CPA senior economist, this suggested, “construction product manufacturers have shaken off the pessimism over future performance evident at the end of last year”.

She added, “With Brexit-related uncertainty still providing a downside risk to decision-making, however, it is important that government provides certainty over the pipeline for large public sector and infrastructure projects that will help sustain activity.”

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