Construction News

Mon August 19 2019

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Second quarter fall in activity reverses first quarter growth

9 Aug Latest ONS figures show that construction output in Great Britain decreased by 1.3% in the second quarter (April to June) of 2019, largely reversing the increase of 1.4% in the first quarter.

The second quarter decrease of £521m was driven by a fall of 2.6% in repair & maintenance, which was due largely to a 6.0% decline in private housing repair & maintenance, with a 0.9% fall in non-housing repair & maintenance also contributing.

New work output decreased by 0.5% in Q2 2019, driven by a decline in private new housing and public other new work – the latter seeing its largest quarter-on-quarter decline since quarterly records began, with a fall of 10.9%.

According to the Office for National Statistics (ONS), monthly construction output in June 2019 decreased by 0.7% (£98m) to £13,632m compared to May. This was due to a 2.0% decline in repair & maintenance and zero growth in new work.

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Industry comment

Rebecca Larkin, senior economist at the Construction Products Association, commented: “The sharpest decline in construction activity was the 0.7% monthly fall in June, as a result of unseasonably bad weather delaying work on-site, particularly in the RM&I sectors, which account for around one-third of overall output. However, even though construction lost £521m in output compared to Q1, the volume of activity was still higher than a year ago. This was driven by clear pockets of activity in house building by housing associations and local authorities, with public housing output reaching a record high level in Q2, and although output fell in quarterly terms for private housing and infrastructure, output from these sectors remains at a historically high level. The performance of other sectors such as commercial offices and retail, industrial factories is less convincing against the backdrop of Brexit uncertainty that complicates decision-making on investments with a high up-front outlay.”    

Blane Perrotton, managing director of the surveyors Naismiths, said: “Bad just turned into worse. Finding good news in this unrelentingly bleak snapshot of the construction industry in the second quarter is needle in a haystack stuff.

“The brief flurry of stockpiling seen in the run up to March now feels like a lifetime away. Stripped of that crutch, the second quarter brought pain upon pain. New work in the public sector plunged by more than a tenth, the largest quarterly fall ever seen.

“Private sector housebuilding – once a rare bright spot in an industry under siege elsewhere – saw its decline accelerate, and the omens for the future aren’t good either. With the forward-looking PMI suggesting that new orders are drying up and sentiment is on the floor, construction could soon be in a race with manufacturing for the unwanted accolade of being the first sector of the UK economy to enter recession. At this rate, that is one of the few things that will be achieved by October 31st.”

Matthew Pratt, chief operating officer at house-builder Redrow, said: “Compared to what we’re experiencing, it’s somewhat surprising to see output in new private housing down on the month across the board. This is disappointing but we should see the uplift in year-on-year new work figures as a positive, indicating a continued appetite for new homes which housebuilders are rising up to meet. Over the last few years, the UK housing market has come face-to-face with a number of challenges as a result of government policy and economic uncertainty, from reforms to stamp duty to confusion on how Brexit will further impede on our current skills shortage. The housebuilding industry is working hard to meet government’s ambitious targets but, to be successful, housebuilders need to operate in an environment where they can invest with confidence.

 “Although Brexit should be a priority for Boris Johnson, the property market needs to be high on his agenda. Boris’ efforts in stimulating the London market during his time as mayor of London should put him and his cabinet in fairly good stead to manage this. Yet, if we are to see an immediate impact, we need to have greater clarity and confidence in initiatives such as the Help to Buy regional price caps. Stamp duty charges have also put a strain on the market for some time now, and so we hope to see him follow up on his intention to abolish the tax on homes under £500,000 as outlined in his campaign. This would unlock much needed-homes across the country for first time buyers and get the market moving again.”

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