Weaker growth in UK

12 June 2015

UK construction output in April 2015 fell by 0.8% compared with March 2015, after a rise of 1.4% in March, according to the latest figures from the Office for National Statistics (ONS).

According to the ONS, the UK’s largest independent producer of official statistics, output is defined as the amount charged by construction companies to customers for value of work produced during the reporting period, excluding VAT and payments to sub-contractors.

In the reporting period, repair and maintenance (R&M) decreased by 4.8% while all new work increased by 1.6%. Within the R&M category, all work types reported decreases, notably non-housing R&M which fell by 7.2% and public housing R&M which fell by 6.2%.

Within all new work, new housing was the main contribution to the increase of 1.6% in April 2015 compared with March 2015, increasing by 5.4% with both public and private housing reporting increases.

Compared with April 2014, output in the construction industry increased by 1.5% in the same month this year. This is the 23rd consecutive month of year-on-year growth. However, the ONS pointed out that this was the weakest year-on-year growth since November 2013.

New orders for the construction industry in the first quarter of 2015 were estimated to have increased by 0.4% compared with the fourth quarter of 2014, and by 8.0% compared with the first quarter of 2014.

There were increases in infrastructure (18.6%), private industrial (6.1%), new housing (1.2%) and all other work (0.1%) in the first three months of 2015.

General Election

Dr Noble Francis, economics director of the UK’s Construction Products Association, said, “Total construction output fell slightly in April but this was expected due to the uncertainty prior to the General Election and its adverse impacts on consumer and business confidence.

“Specifically, this influenced the kinds of construction work that can be temporarily delayed such as repairs, maintenance and improvements work, which fell 4.8% in April. New construction work was affected to a lesser extent and, despite election uncertainty, private housing output was 4.5% higher than in March and 16.6% higher than one year earlier.”

He added, “Overall, construction output was still 1.5% higher than one year earlier and, looking forward, the ONS new orders for construction point to further growth in activity over the next 12 to 18 months.

Healthy growth

Chris Temple, engineering and construction leader at PricewaterhouseCoopers, said, “Despite these latest figures, we continue to expect the sector to show solid, healthy growth during 2015.

“In the run-up to the general election, we saw a temporary slowdown in new orders. However, we don’t expect that this will be significant enough to counteract the upward trend of growth for the year, and there is still strong confidence in the sector for 2015 and beyond.”

He said there was a lack of large infrastructure projects at the moment, accounting for the lull in that part of the sector.

“Furthermore,” added Temple, “uncertainty about the economy in Europe has knock-on effects for business confidence and the short-term order books of construction firms. But political certainty in the UK after the general election and further details on the government’s plans for most subsectors including infrastructure should give the sector more confidence.

“Construction firms will look to the government to give further clarity on its plans in the forthcoming Summer Budget. We’re confident that this temporary slowdown won’t become a longer-term trend, and our clients are optimistic for their growth prospects in the rest of 2015.

“Overall the picture for the construction sector remains healthy,” Temple said.

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