Construction output continued to recover following a relatively weak start to the year, increasing by 3.3% in the three months to July however, new orders declined by 6.5% in Q2
New construction output figures published by the ONS highlight the construction sector experienced three months of stable growth which was driven by growth in both repair and maintenance, and all new work, which increased by 5.3% and 2.3% respectively
Construction output also grew in the month-on-month series, increasing by 0.5% in July 2018, driven mainly by a 4% increase in new private housing work.
The recovery in construction output comes following four months of contraction at the start of 2018, attributed to both bad weather and project slowdowns in the wake of Carillion’s collapse.
Construction output increased by £1.34bn in the three months to July. The most notable contribution to growth came from infrastructure, which increased by £414m. In addition, notable three-month on three-month growth came from the repair and maintenance sector, with both non-housing repair and maintenance increasing by £348m, and housing repair and maintenance growing by £375m.
In contrast, the only sector to provide downward pressure on output in the three months was public other new work, which fell for the sixteenth consecutive month, decreasing by £73m in July.
Total new construction orders declined 6.5% in Q2, decreasing for the third consecutive quarter, reaching its lowest level since Q 1 of 2013.
The fall in all new orders has been driven by the decrease in new housing new orders, which fell by 17.6% in Q2 2018. This contraction was driven by a fall in the value of private housing new orders, which more than offset the rise in public housing contracts.
In contrast, the value of all other work new orders has remained relatively flat in Q2 2018 – increasing by 0.2% compared with the previous quarter – driven by increases in infrastructure and private commercial new orders.
Commenting on the new construction output figures, Michael Thirkettle, Chief Executive of construction consulting and design agency, McBains, said: “After the last set of ONS figures showed an upturn following several months of decline, this second successive rise represents another much-needed boost to confidence in the sector.
“Underlying growth remains fragile however, and the real test will be if this can be sustained in the months to come, given the uncertainty over issues like Brexit that have impacted on UK companies’ commitment to new projects over the last two years.
“In particular, separate figures published by the ONS recently show the lowest level of net migration from the EU since 2012, which has again raised concerns as to how construction will cope with a reduction of a skilled labour supply from the EU post-Brexit. If sustained growth is to be realised, then the industry will need the workforce with the right skills, but this is far from clear at present.”
