UK market still volatile

UK construction output in August dropped slightly compared to July, but was 4% up over August last year mainly as a result of an increase in new work.

The UK’s Office for National Statistics (ONS) said that in recent periods, construction output had been volatile, rising by 1.9% in the second quarter of 2013 after a decline of 1.3% in the first quarter.

It said the picture had been similarly volatile in the first two months of the third quarter of 2013, with July showing growth of 2.8%, while August showed a decrease of 0.1%.

ONS estimated that in August 2013, the seasonally adjusted volume of monthly construction output decreased by 0.1% when compared with July 2013. This slight decrease was apparent in both new work (down 0.1%), and repair and maintenance, which fell 0.2%.

It said there were mixed performances across the different types of work. Private industrial and private housing both saw new work increase, by 3.9% and 1.6% respectively, while public other new work fell by 3.2%, and private housing repair and maintenance dropped 1.8%.

The 4.0% rise in August 2013 over August 2012 was mainly down to a 5.5% increase in new work. Within the new work category, new housing increased by 16.7% while infrastructure fell by 5.5% when compared with August 2012.

In August 2013, these sectors accounted for approximately 32% and 19% of all new work respectively.

ONS figures showed construction output year-on-year growth for three consecutive months for the first time since May 2011, with the main contribution to this growth coming from the new housing work.

Comparing the three months of June to August with the same three months a year ago, construction output increased by 3.0%. Over the same period, new housing showed growth of 14.7% – the largest three-months-on-a-year growth since January to March 2011.

Construction output grew by 2.4% when compared with the previous three months (March to May 2013).

Noble Francis, economics director at the UK’s Construction Products Association, said the August figures added to the association’s view that the industry was gradually coming out of one of the worst downturns in its history.

“Private housing is clearly leading the activity,” he said, “showing a significant year-on-year rise of 18.0%. Even excluding private housing, the overall industry was up 1.7% from this time a year ago.”

He pointed to other areas of strength such as commercial offices and retail, and the repair and maintenance sectors for both non-housing and private housing, before adding, “Infrastructure, however, remains a major concern as year-on-year output fell 5.5%.”

He said that despite repeated government announcements of capital investment for the sector, infrastructure output had in fact fallen 11.0% since the coalition government came to power.

“The Association forecasts construction output growth of 2.2% in 2014 and 4.5% in 2015.

“The recovery will be led primarily by private housing in the short term, but will only be sustained in the long term with broader growth from other sectors and most notably the vital infrastructure sector, where government announcements will need to translate into real activity on the ground,” he said.

Steve McGuckin, UK managing director of global construction and project management consultancy Turner & Townsend, said, “Britain's construction industry has been making great strides for much of this year – and August's underwhelming figures are a blip, not a trip.”

He said several public sector construction programmes were winding down, so the 3.2% fall in public sector output was to be expected.

“But it is encouraging that the resurgent private sector construction is mitigating the impact so well,” he continued. “Private industrial and private housing output were both up strongly in August, helping the industry as a whole keep honours even.

"The long-term trajectory is upward, and the industry's 4% year-on-year increase in output shows how far it has come.”