Construction Growth Slows in Q3 2018 as October New Work Reaches Record Value High

Construction output in the three months up to October 2018 was 1.2% higher than the previous three-month period; this growth was slower than in recent months, with a steady decline being seen from a 2018 high of 3.0% growth for the equivalent series in July 2018.

A historic high level of £9,221 million in the new work chained volume measure seasonally adjusted series was reached in October 2018; this represents the highest value seen since monthly records began in January 2010.

New orders grew by 3.4% quarter-on quarter in July to September 2018, with a strong increase in public other new work of 31.9% helping offset a 5.3% decline in housing new orders. Despite this increase, levels remain below those typically seen over the last five years of new orders data.

Month-on-month figures showed a slight decline as construction output decreased by 0.2% in October 2018 compared with strong growth of 1.7% in September 2018.

The .2% decrease in October 2018 was driven by declines in infrastructure (down 3.7%), public new housing (down 8.1%) and total repair and maintenance (down 0.8%). The largest contributor offsetting these decreases was private new housing, which grew by 2.4%.

Sarah McMonagle, Director of External Affairs at the FMB, said, “The UK construction sector is more or less flat-lining with a small decline of 0.2% in October compared with the previous month. Rising costs for large and small construction firms are contributing to the slight drop in construction output. Recent Government statistics show that in the past year, there were nearly 3,000 insolvencies in the construction industry. While wages are continuing to rise because of the ever-worsening skills crisis in our sector, firms are also feeling the pinch because of the rising cost of materials.

“The depreciation of sterling following the EU referendum has meant key materials have become more expensive. We are expecting material prices to continue to squeeze the margins of construction firms with recent research from the Federation of Master Builders showing that almost 90 per cent of builders believe that prices will continue to rise in the next six months.”

“The future is still looking uncertain for the UK construction sector because the Government has set out plans for a post-Brexit immigration system that would severely worsen the skills shortage. The Government has said it will limit the number of low skilled workers entering the UK from the EU and further afield. This would include thousands of tradespeople, including bricklayers and carpenters, and these roles are ones that the construction sector relies on. More than 9 per cent of the UK’s construction workers are from the EU and this rises to one third in London. It is therefore imperative that the Government listens to the needs of the sector and delivers a post Brexit immigration system that allows us to draw on essential migrant workers. Without this, we won’t be able to keep building at the current rate and construction output will continue to fall,” McMonagle added.

 

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