Output still heading up

The latest statistics from the ONS show construction output has continued to rise steadily over the summer.

Following a slow start to the year, marked by the terrible weather, construction output has increased as the temperatures have risen. The latest figures continue the trend, seeing a rise in of 3.3% in the three months to July 2018.

A rise in both repair and maintenance work, and a continued rise of all new work, led the increase in output, with increases of 5.3% and 2.3% respectively.

The more volatile month-on-month series, also saw growth with a 0.5% increase in July 2018. This monthly series saw new private housing work dominate, at an increase of 4.0%.

However, total construction new orders declined 6.5% in Quarter 2 (Apr to June) 2018, decreasing for the third consecutive quarter, and reaching its lowest level since Quarter 1 (Jan to Mar) 2013. This quarter’s drop has been driven by a huge fall in new housing orders of 17.6%.

As a result of the growth in July 2018, construction output is now 30.9% above the lowest point in the last five years (July 2013) with figures seeing output increase by £1.34Bn in the three months to July 2018.

Infrastructure work has contributed most to the current figures, increasing by £414M in the three months to July 2018. While the repair and maintenance sector turned around a slump, with both non-housing repair and maintenance, and housing repair and maintenance experiencing growth, increasing by £348M and £375M respectively.

In contrast, public other new work was the only sector to provide downward pressure, falling for the 16th consecutive month in the series, decreasing by £73M in July 2018.

In comparison with July 2017, construction output grew by 3.5%. This month-on-year increase occurred as a result of a 4.3% increase in new work and a 2.2% increase in repair and maintenance. The most notable contributions to month-on-year growth came from infrastructure and private housing new work, which grew by 11.5% and 10.4% respectively.

Commenting on the figures, Michael Thirkettle, Chief Executive of leading construction consulting and design agency McBains, said: “After the last set of ONS figures showed an upturn following several months of decline, this second successive rise represents another much-needed boost to confidence in the sector.

“Underlying growth remains fragile however, and the real test will be if this can be sustained in the months to come, given the uncertainty over issues like Brexit that have impacted on UK companies’ commitment to new projects over the last two years.

“In particular, separate figures published by the ONS recently show the lowest level of net migration from the EU since 2012, which has again raised concerns as to how construction will cope with a reduction of a skilled labour supply from the EU post-Brexit. If sustained growth is to be realised, then the industry will need the workforce with the right skills, but this is far from clear at present.”