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Wed July 18 2018

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Output rebounds to deliver fastest growth for two years

10 Jul Latest numbers from the Office for National Statistics show that construction output showed signs of recovery in May 2018, increasing by 2.9% compared with April 2018.

May 2018 saw the fastest monthly growth rate in two years, reflecting an upturn in activity following poor weather conditions during the first quarter. Compared to a year earlier, output rose 1.6%, but contracted by 1.7% on a rolling three-month basis. This fall captures the £247m drop in construction work caused by snow storms in March.

The month-on-month growth in construction output was in part driven by the recovery of private housing repair and maintenance work, which grew 7.3% in May 2018 following a weak start to the year.

Following consecutive periods of month-on-month growth in the final two months of 2017, construction output reached a record high. Construction output peaked in December 2017, reaching a level that was 31.5% higher than the lowest point of the last five years, May 2013. Despite a weak start to 2018, construction output has begun to show signs of recovery and, following the growth in May 2018, construction remains 30.3% above the level seen in May 2013.

Rebecca Larkin, senior economist at the Construction Products Association, commented: “The construction industry appears to have caught up with some of the work lost in February and March due to the freezing ground conditions and snow disruption. Month-on-month gains were evident across all sectors, but were strongest in private housing repairs, maintenance and improvement (RM&I), the third largest construction sector, due to warmer weather and longer days.   

“Private housing new build was 8.4% higher than a year earlier, which points to strength in activity beyond basic catch-up as the industry enters the busier spring and summer selling season. However, for the year to date overall construction output remains 0.3% lower than a year earlier, with particular weakness in public non-housing (mainly education and health) and commercial, where a significant fall in new orders signals smaller pipelines of work.” 

Michael Thirkettle, chief executive of surveyors McBains, saw the numbers differently, focusing on the underlying three-monthly fall in output. “Today’s figures make for further depressing reading and show that construction is well and truly mired in the deep waters of recession,” he said.

“UK and international companies and investors that are looking to invest in the UK are still struggling to get a read on the post-Brexit destination, meaning a reluctance to commit to new projects. In particular, the wages of scarce skilled tradespeople has been rising sharply in recent months and companies will face a further squeeze on labour with the supply of non-UK skilled workers being cut off when the UK leaves the EU – an effect, which coupled with material price increases, is squeezing margins substantially.”

MPU

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