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Fri March 05 2021

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Industry output fell back in May

14 Jul 14 Construction industry output fell by 1.1% in May 2014 but remains around 3.5% higher than in May 2013, according to latest official estimates.

House-building remains the construction industry's main driver
House-building remains the construction industry's main driver

Having increased by 1.2% in April, output dropped back again the following month, latest data from the Office for National Statistics reveal. Both new work and repair & maintenance fell by 1.1% in May 2014.

Compared with May 2013, output in the construction industry increased by 3.5%. Year-on-year all new work and repair & maintenance both increased by 3.7% and 3.1% respectively.

The main driver of this recent growth is housing construction which has increased by 19.4%.

There were notable year-on-year falls in infrastructure, public other new work and private commercial.

Housing new work provided the largest contribution to the increase in all new work compared with May 2013, with both public and private housing seeing substantial increases of 29.3% and 16.8% respectively. This resulted in all new housing increasing by 19.4%. Private industrial new work also increased compared with 2013.

While output has fluctuated from month to month, the industry has now seen year-on-year growth for 12 consecutive months

Month-on-month, the fall in construction output in May was driven mainly by private commercial work which fell by 3.6%, and repair & maintenance which fell by 1.1%. New housing output, which includes both public and private housing, increased for the third consecutive month, experiencing growth of 1.1% driven entirely by the public housing component.

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Commenting on the data, Turner & Townsend UK managing director Steve McGuckin said: "The surprise reversal of April's growth comes as a timely reality check for the construction industry. Order books and levels of confidence are both strong, but despite the great progress made in the past year, no-one should take the momentum for granted.

"Month-on-month figures are notoriously volatile and should be taken with a healthy pinch of salt; but the sustained fall in infrastructure output – down more than 8% in a year – cannot be explained away so easily.

 "The booming residential sector has been the engine of the wider construction industry's growth, and with demand still strong it has plenty of road left to run. Even if house prices are close to peaking in the southeast, sales are robust and housebuilders are unlikely to suffer much in the short-term. Many construction firms have over two years' worth of orders on their books, and more than enough momentum to keep building.

"In fact a plateauing of house prices could be a good thing – it should reduce the inflationary pressure of off-plan speculative purchases and allow the industry to rebalance to build a wider range of properties.

 "But while sectors other than residential are showing some encouraging signs, the construction industry as a whole is still worryingly reliant on housebuilding. That leaves it exposed to the impact of inevitable interest rate rises. The construction industry is responding well to Britain's urgent need for more homes, but its growth must become more broadly based if it is to ride out any bumps on the road ahead."

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