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Construction output rises in June but recovery remains juddery

11 Aug 14 Construction industry output in June is estimated to have risen by 5.3% year-on-year and by 1.2% compared with May 2014.

June saw year-on-year increases in both new work and repair & maintenance of 5.4% and 5.0% respectively.

However, quarterly output remains 10.3% below the pre-crash boom.

The second quarter of 2014 maintained output levels seen in the first quarter, with zero growth. Quarterly growth is estimated at 0.0%, an upwards revision from the previous 0.5% assumption used in official estimates for gross domestic product (GDP).

However, the annual growth between Q2 2014 and Q2 2013 was estimated to have increased by 4.8%.

The Office for National Statistics (ONS) said that the quarterly output in the construction industry all work series has steadily increased since Q1 2013 and in Q2 2014 was estimated to be 6.7% higher than in Q1 2013.

Despite this increase, all work remains 4.1% below its post economic downturn peak in Q2 2011 and 10.3% below its pre economic downturn peak in Q1 2008.

The growth in construction output since Q1 2013 was a result of increases in both new work and repair & maintenance. New work increased 6.7% in Q2 2014 although the series remained 8.5% lower than its post economic downturn peak in Q2 2011 and 12.3% below its pre economic downturn peak in Q1 2008.

The repair & maintenance statistics since Q1 2013 show less volatility than the new work numbers but similarly to new work, from 2013 onwards, there has been a steady increase in the volume of repair & maintenance work. This series was estimated to be 6.9% higher in Q2 2014 than in Q1 2013 and has produced seven consecutive quarters of growth.

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EC Harris head of strategic research & insight Simon Rawlinson said that the data“shows that growth in output has ground to a halt in the second quarter”.

He added: “Considering that recent GDP data suggested that construction had contracted by 0.5% in the second quarter, the data is positive, but provides no room for complacency. The star performing sector in the quarter has been industrial – with activity driven both by factories and distribution.  Residential also continues, as would be expected, to grow steadily.

“The commercial sector is bumping along, but with increased confidence and much wider availability of funding, activity can be expected to pick-up later in the year as projects proceed to site in a wider range of markets in the UK.

“Data from 2014 so far points to a real challenge for contractors and clients.  If growth in workload is so steady – why are resources so constrained so early in the cycle?  Clearly part of the answer lies in the regional concentration of activity and the burst of procurement activity that is currently taking place.  However, the wider market may also being talked up as localised sectors shift into overdrive.”

He said that the construction recovery “remains at an early stage and is yet to cemented by a step change in workload”.

Mr Rawlinson concluded: “The challenge for the second quarter is to ensure that projects in the pipeline remain viable and actually get built.”

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