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Thu January 23 2020

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October output tumbles 2.3%

10 Dec 19 Construction output decreased by 2.3% in October 2019, which was the largest monthly fall since January 2018 when it fell by 2.6%.

October’s drop in output was mainly down to a 3.1% fall in new work; repair & maintenance output decreased by a more modest 0.6%.

The latest bulletin from the Office for National Statistics also shows a 0.3% drop in construction output for three months of August to October 2019, compared with the previous three-month period. This was driven by a fall of 1.4% in repair & maintenance, with a smaller positive contribution from 0.3% growth in new work.

In repair & maintenance, the fall in the three months to October 2019 was largely because of the 3.6% decline in private housing repair and maintenance, with public housing repair and maintenance also falling 0.8%.

Total construction output reached £13,322m in October 2019, which is the lowest it has been since April 2018 when output was £13,180m.

The ONS statisticians report that there was anecdotal evidence from a number of survey respondents that bad weather in October had an impact on output – “although it is difficult to quantify the exact impact on the industry,” they said.

Industry comment

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, said: “Two steps forward, one big step back. After a surprisingly buoyant third quarter, Britain’s builders slipped back into decline in October. The largest month-on-month fall in nearly two years all but wiped out the steady gains made in Q3, dragging the industry back to its painfully familiar pattern of stagnation.

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“Such an abrupt fall in new work is particularly worrying, and suggests contractors simply don’t have enough new jobs to replace completed projects.

“While new orders held steady in the third quarter – a marked improvement on the wasteland of Q2 – order books are now getting worryingly thin. Warning lights have also come on in the residential sector. Housebuilders have long been the standard bearers for the construction industry as a whole, but even they saw output slide badly in the three months to the end of October.

“The industry’s prospects now look as finely balanced as Thursday’s election. A decisive result should finally bring some clarity to the market and shake it out of its slumber, but for now many investors are opting to defer decisions, starving contractors of demand and keeping the industry trapped in its light-headed inertia.”

Scape Group chief executive Mark Robinson said: “October marked another dreary month for the construction industry as it experienced the largest monthly fall in growth in almost two years and total output fell by a very significant £309m.

“The industry has been spiralling towards a recession since the Brexit vote and it can only take so much more bad news. A lack of clarity over immigration and trade policies, as well as ongoing economic uncertainty, has forced construction bosses across the country to pause existing projects and hold off on making decisions on new work, which is evident through the large falls in repairs and maintenance, infrastructure projects and private housebuilding revealed today.

“However, the general election outcome does have the potential to create a bounce back in activity in the New Year, so the industry will be holding its breath for a new Government which has a clear mandate to implement a fiscal strategy and one that can make clear and concise decisions that will provide clients and construction firms with the confidence to press ahead with projects. However, on the flip side, a hung parliament could send the industry into further instability and disarray.”

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