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Sun February 28 2021

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April output up 4.6% year-on-year

13 Jun 14 The seasonally adjusted estimate of construction output in April 2014 rose by 1.2% on March, growing by £113m.

Latest estimates from the Office for National Statistics (ONS) show that there was a 0.9% rise (£55m) in new work and a larger increase of 1.6% (£57m) in repair and maintenance.

Compared with April 2013, construction output increased by 4.6% year-on-year. All new work increased by 4.9% due to strong increases in new housing and private industrial work.  Repair and maintenance increased by 4.2% over the same period.

The second estimate of GDP for Q1 2014 published on 22 May 2014 included an estimate of construction growth of 0.6%. This has now been revised up to 1.5% GDP growth.

Construction new orders in Q1 2014 were estimated to be 6.3% lower than Q4 2013. There were falls in orders for public new housing (-45.7%), infrastructure (-16.5%), private industrial (-14.6%) and private commercial work (-1.9%).  Public other new work and private housing new orders both increased by 6.8% and 2.8% respectively.

The fall in public housing was the largest fall since these statistics began in 1964, However, the volume of new orders of public housing was not as low as in Q4 1990. A possible reason for the fall in public housing new orders is that investment in housing associations is coming from private investment rather than a public source, ONS suggested.

New Orders - Q1 2014, Constant (2005) index prices, seasonally adjusted

Turner & Townsend managing director Steve McGuckin said: "With such a big upward revision to the construction sector's contribution to GDP growth, the industry can hold its head high.

"Its power to generate jobs and broader economic progress is undimmed, and construction growth has finally spread from the southeast to many other parts of the UK.

"But the long lag time between an investment decision being made and shovels in the ground means these output figures don't yet fully represent the strong levels of activity at the front end of the industry.

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"The 'when, not if' debate over interest rate rises isn't reflected here of course. But going forward the hope is that the prospect of rates gradually returning to more normal levels will temper only price rises, not demand, in the surging residential property sector.

"The commercial property sector is less susceptible to interest rate rises; and with rents still robust, the pipeline of new building work is stronger than it has been in years.

"The confidence in London is now so strong that contractors are able to pick and choose their projects. The days of builders bidding for every sniff of work are gone. Tender prices are still competitive, but with input costs starting to creep up this may not last forever.

"Infrastructure remains a serious worry though. Despite a tiny rise in April, this sector's output has slid 7.6% since the same time last year. While industrial sector work is showing some very encouraging signs, the construction industry as a whole is still heavily reliant on housebuilding.

"While it's great that the industry has stepped up to the plate to address Britain's chronic need for more homes, the growth must become more broadly based if the industry is to ride out any bumps on the road ahead."

Simon Rawlinson, head of strategic research and insight at EC Harris said: “Today’s new orders figures are an indication that the momentum that has been building up in the industry over the past 12 months may not have been as strong as previously thought. Setting aside the remarkably deep fall in orders in the public housing sector, one of the most significant trends that the latest release reports is that the volume of new orders measured at a national level has been shrinking in real terms for the past three quarters – with the rate of decline accelerating in the first quarter of the year.

“Overall volumes are still significantly higher than seen a year ago, but according to ONS data, a breakthrough into sustained high levels of activity isn’t happening just yet. The commercial sector – flat-lining at just over £3bn a quarter is a good illustration of this. 

“However, looking at the regional data – which is inevitably more variable – points to a big disparity in regional markets, with London seeing particularly strong growth in non-residential, non-infrastructure sectors.

“So what are the implications?  Clearly contractor order books are filling, but perhaps not as quickly as had been anticipated in many parts of the country.  Clearly there is pressure on resources, but this is not being seen in all markets across the country.  As the recovery evolves, the industry’s ability to make best use of all of its capability will be critical to deliver on time and to budget.”

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