Sluggish Construction Output in May 2019

NEW FIGURES from the Office for National Statistics (ONS) showed sluggish growth in construction output with an increase of 0.6% in May 2019 compared to April 2019, reversing the previous two months’ declines of 1.5% and 0.5% respectively. New work grew by 0.4% while repair and maintenance increased by 1.2%.

However, in contrast construction output growth was flat (0.0%) in the three months to May 2019 compared to the period Dec-Feb, with falls in repair and maintenance of 0.5% being offset by a 0.3% increase in new work.

Breaking sectors down, new work saw an increase in the three months to May 2019 compared to the previous three month period, driven by private commercial new work (2.2% growth) and public new housing (8.4% growth).

In repair and maintenance, the decrease in the three-month on three-month series in May 2019 was because of declines in both private and public housing repair and maintenance, which decreased by 2.5% and 3.2% respectively.

Slow growth trend
Overall, while the last six months have seen volatility in the monthly series for construction output all work, the quarterly path shows a general trend of slow, sustained growth since Quarter 2 (Apr to June) 2017. That said, the growth seen since Quarter 2 2017 is markedly slower than the growth seen prior to that period, as can be seen in the chart above. The quarterly series provides a smoother and more comprehensive view of trends within the construction industry than the more volatile monthly series.

The flat top-level growth in the three-month on three-month all work series in May 2019 was also reflective of a mixed pattern of rises and falls across the construction sector. Repair and maintenance saw a slight decline of 0.5%, while new work grew by 0.3%. In repair and maintenance, the declines seen are driven by housing repair and maintenance, with private and public housing repair and maintenance being down by 2.5% and 3.2% respectively. This was slightly offset by a 1.7% growth in non-housing repair and maintenance.

The growth in new work was driven by public housing and private commercial new work, which grew by 8.4% and 2.2%, with a smaller contribution from a 1.3% increase in infrastructure new work. These were primarily offset by the decline in public other new work, which fell by 9.0% and was the largest contributor to declines of any new work sector by a significant margin.

Industry Response

Clive Docwra, Managing Director of  construction consulting and design agency McBains, said:

“The construction industry will give a cautious welcome to these figures, as they show a moderate increase in output in May after two successive falls in March and April.  We expected a much bleaker picture given the continuing fog surrounding Brexit and pessimistic predictions of a sluggish economy.

“Growth of 2.2% in private commercial new work and 8.4% in public new housing was also better than forecast.

“We fear this could be a temporary bounce however, as the longer term outlook is one of uncertainty with many projects on hold until the detail of the UKs EU withdrawal becomes clearer.”

Sarah McMonagle, Director of Communications at the FMB, said:

“The poor performance of the construction sector over the past few months was driven partly by a drop in activity in the repair and maintenance sector. As you would expect, this part of the construction industry is particularly vulnerable to dips in consumer confidence, which the threat of a ‘no deal’ Brexit continues to perpetuate.

“There would be no better way to encourage homeowners to commission building projects in the second half of this year than by slashing VAT on housing repair, maintenance and improvement from 20 percent to 5 per cent. Furthermore, when we asked our members how the next PM could best prevent an economic downturn, almost 90 per cent felt this was the most effective way to achieve it.”

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