ONS reveals largest fall in construction output in seven years

Latest News Thu, Jan 11, 2018 8:56 AM

Construction output contracted for the sixth consecutive period in the three-month on three-month time series, falling by 2% in November 2017; this represents the largest fall since August 2012.

According to the latest ONS figures, there were three-month on three-month decreases in both all new work, and repair and maintenance, which fell by 2.1% and 1.7% respectively, although private housing new work did grow by 1.2%.

Despite the overall three-month on three-month fall, construction output increased by 0.4% month-on-month in November 2017.

The month-on-month increase in construction output occurred as a result of a 0.5% rise in repair and maintenance, and a 0.4% increase in all new work.

Rebecca Larkin, Senior Economist at the Construction Products Association, commented: “(This) data confirm what has been signalled by early indicators and industry surveys – that construction ended 2017 on a weak note.

"Past falls in new orders, particularly in the commercial and public non-housing sectors, now appear to filtering through into lower volumes of work. On a three-month basis, commercial output fell 5.4%.

“It now looks impossible that the industry avoided a full quarter of contraction in Q4, with the £30 billion private housing sector contributing the only positive story. Therefore, construction is set to have caused a drag on overall UK economic growth during the quarter."

The monthly business survey, Construction output, collects output by sector from businesses in the construction industry within Great Britain. Output is defined as the amount chargeable to customers for building and civil engineering work done in the relevant period excluding VAT and payments to sub-contractors.

Construction output fell by £779 million in the three-month on three-month time series. This fall has been broadly driven by decreases in private commercial work, infrastructure and total housing repair and maintenance. Private commercial work decreased by £401 million in November 2017. Meanwhile, both total housing repair and maintenance, and infrastructure continued their recent declines, falling by £164 million and £157 million respectively.

The majority of other sectors were broadly flat in November 2017, with only private housing providing a positive contribution to growth, increasing by £100 million; representing the fifth consecutive period of growth in this sector.

Mark Robinson, Scape Group Chief Executive, said the figures underline just how important confidence and certainty are for the industry and the wider economy.

"However we must not lose sight of the bigger picture," he added. "The long-term outlook for the construction sector is positive and the public sector will play a significant role in strengthening confidence in the year ahead, because the country’s housing and infrastructure challenges will require significant investment. The Government recently reaffirmed its commitment to innovation and investment in November’s Autumn Budget, including the extension of the infrastructure fund.

“While private housebuilding remains positive, the output of public housebuilding is still far too low to even come close to addressing the shortage of affordable housing. Theresa May has just named the seventh housing minister since 2010 in the midst of a nationwide housing crisis, and I urge the new Minister to look seriously at the role local councils can play in affordable housing delivery. We need a revolution in council housebuilding, and this means greater resources and powers for local councils. I hope the Minister is the right man for the job.

“The Government must also seek to create a more connected Britain, and a stronger Northern Powerhouse and Midlands Engine. The UK has a strong pipeline of new work, but we must ensure a joined-up approach on delivery to ensure efficiency and alleviate pressure on the availability of skills.”

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