UK's construction sector records third successive quarterly decline

Despite a surprise surge in December, construction output continued its decline after recording its third consecutive quarterly fall in the three months to December 2017.

According to the Office of National Statistics (ONS), construction output fell 0.7% during the three-month on three-month period to December 2017, representing both the eighth consecutive three-month on three-month fall and the third consecutive quarter-on-quarter decline in output. 

However, the figures also showed that construction output grew 5.1% during the whole of 2017, largely thanks to strong growth during the end of 2016 and the beginning of 2017. In addition the sector saw a sharp increase month-on-month in December, whereby output grew by 1.6%. 

Furthermore, construction output fell by £283m in the three-month on three-month time series in October to December 2017 compared with July to September 2017.

Despite the boost in the month to December, Mark Robinson, Scape Group chief executive, believes today’s figures show the picture isn’t “so rosy” for 2018 and says firms need to prioritise recruitment, upskilling and training to build long-term capacity.

He added: “Today’s data is more positive than some predicted. In December last year, total new work increased by 4% largely boosted by a £169m increase in infrastructure work, and a £81m increase in private housebuilding. Unfortunately, the picture doesn’t look quite so rosy this year, following last week’s Markit/CIPS results which indicated that the sector is currently under sizable pressure. Whilst it is true that short term indicators such as Brexit and the downfall of Carillion may put further stress on output in the coming months, the strong underlying demand for new work remains, providing some confidence that the situation will improve throughout the year. We must look to more innovative new building techniques, such as modular, in order to improve efficiency and boost bottom lines.”

The ONS figures do provide some optimistic reading in relation to private housing with an increase of £81m when compared to November 2017 - this represents the fifth consecutive month of growth and the highest level on record. 

But the ONS figures released today come on the back of the IHS Markit's purchasing managers' index (PMI) results for the construction industry which suggested things are unlikely to improve during the first quarter of 2018. The managers' index dropped to 50.2, which is just above the 50 mark that demonstrates growth.

Commenting on the statistics, Michael Thirkettle, chief executive of construction consultants McBains, said: "Today’s figures show a continuing stagnation in output – likely to be in no small part due to UK developers still circumspect about what the Brexit deal will look like before they commit to further investment. The falling value of the pound is still impacting on the cost of materials, further stifling large-scale development.”

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