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Construction output flatlines

10 Jul 19 Latest numbers from the Office for National Statistics (ONS) indicate that there was zero growth in construction output in Great Britain this past spring.

Adding up the numbers
Adding up the numbers

The latest ONS three-month on three-month all work series for May 2019 shows growth of 0.0% for construction output.

A 0.3% increase in new work during the March to May 2019 period was offset by a fall in repair and maintenance of 0.5%.

In new work, the increase in the three-month on three-month series in May 2019 was driven by growth in private commercial new work and public new housing, which saw growths of 2.2% and 8.4% respectively.

In repair and maintenance, the decrease in the three-month on three-month series in May 2019 was because of declines in both private and public housing repair and maintenance, which decreased by 2.5% and 3.2% respectively.

Compared to April 2019, construction output in mainland Great Britain increased by 0.6% in May, driven by increases in both new work and repair and maintenance which grew by 0.4% and 1.2% respectively.

Industry comment

Sarah McMonagle, director of communications at the Federation of Master Builders, said: “Alarm bells will be ringing in the ears of the two candidates vying to be Prime Minister, with these latest stats showing that the construction sector is at a standstill. Whoever wins the race for PM, I want to see that person take decisive action in their first days in office by intervening to stimulate our waning sector, which is so vital to the health of the wider economy. Indeed, without it, our country’s house building aspirations will be impossible to deliver.

“The poor performance of the construction sector over the past few months was driven partly by a drop in activity in the repair and maintenance sector. As you would expect, this part of the construction industry is particularly vulnerable to dips in consumer confidence, which the threat of a ‘no deal’ Brexit continues to perpetuate. There would be no better way to encourage homeowners to commission building projects in the second half of this year than by slashing VAT on housing repair, maintenance and improvement from 20 percent to 5 per cent. Furthermore, when we asked our members how the next PM could best prevent an economic downturn, almost 90 per cent felt this was the most effective way to achieve it.”

Scape Group chief executive Mark Robinson said: ‘Today’s data paints a stark picture of the construction industry. Spring is typically when the sector bounces back and output rises, but in reality we are seeing a sector that continues to be dogged by uncertainty. Clients, especially in the public sector, are unwilling to push forward with new work, which has been evident on the ground all year and has now contributed to a £229 million decline in output.

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“On the quarter growth has stalled and, concerningly, this is also being driven by a decline in the repair and maintenance of public and private housing. We know there is a significant requirement for reactive repair work following the devastating tragedy at Grenfell two years ago. The public and private sectors need to push forward with replacing material that has been identified as flammable and bring public and private housing up to a safe standard.

“This month also only saw a small increase in private housing delivery, which has recently been propping up output. It is worrying that neither Conservative leadership candidate has spoken about housing whilst on the campaign trail, beyond Boris Johnson’s vague references to cutting stamp duty. We cannot afford for housing to drop down the political agenda, and become side-lined like so many crucial public services. I see no immediate end to the political infighting and with our new prime minister falling massively short of a mandate from the public, and almost short of a majority in parliament, the industry is going to continue suffering while it holds its breathe and waits for the outcome of Brexit.”

Blane Perrotton, managing director of property consultant Naismiths, said:

“Months of extreme volatility have left the construction industry as punch-drunk as a boxer – tottering three steps forward and then two steps back. This latest snapshot of the sector shows it is still on its feet, but stumbling aimlessly and yearning for the Brexit bell.

“Perhaps most striking is the detail behind the stagnant headline figure. Private sector housebuilding – long the standard bearer of an industry that was in retreat elsewhere – is declining, while public sector housebuilding has rallied to a decent rate of growth.

“Overall, what little growth there was in the last quarter was cancelled out by the sharp contraction in non-housing public sector work.

“While zero growth is not yet a decline, the omens for the future are not good. The forward-looking PMI data found that output in June fell at the fastest rate since the dark days of 2009.

Finance for developers remains cheap and relatively plentiful, but unfortunately this counts for little when investor confidence is being pummelled by constant political uncertainty. With the prospect of a hard Brexit increasing not receding, few in the industry expect the growth-sapping cloud of uncertainty to lift any time soon. Against that backdrop, stagnation isn’t failure, it’s almost an achievement.”

Not everyone was quite so bleak, however. Clive Docwra, managing director of construction consultant McBains, said: “The construction industry will give a cautious welcome to these figures, as they show a moderate increase in output in May after two successive falls in March and April.  We expected a much bleaker picture given the continuing fog surrounding Brexit and pessimistic predictions of a sluggish economy. Growth of 2.2% in private commercial new work and 8.4% in public new housing was also better than forecast.”

But even he was not prepared to peddle in optimism, adding: “We fear this could be a temporary bounce however, as the longer term outlook is one of uncertainty with many projects on hold until the detail of the UKs EU withdrawal becomes clearer.”

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