UK Construction Output Declines in Q2

UK Construction Output Declines in Q2
Source: ONS

UK CONSTRUCTION output decreased by 1.3% in Quarter 2 (Apr to June) 2019, compared with the previous quarter, largely reversing the increase of 1.4% in Quarter 1 (Jan to Mar) 2019, according to the latest construction output figures published by the Office for National Statistics (ONS).

The ONS has associated the fall in Quarter 2 2019 with the downward trend seen since the highs of January and February 2019. The fall seen this quarter brings the level of the quarterly series back to just slightly above that seen at the end of 2018.

Third monthly construction fall

In the monthly series, construction output decreased by 0.7% in June 2019. This is the third monthly fall for the series in 2019 and continues the mixed profile of growth since the start of the year.

The figures also revealed a month-on-month decline in repair and maintenance in June 2019, while new work saw flat growth. For repair and maintenance, which decreased by 2.0%, there were declines in all types of work with the largest contribution coming from private housing repair and maintenance, which fell by 3.8%. This was accompanied by declines in both public housing, and non-housing repair and maintenance, which declined 3.4% and 0.4% respectively.

According to the ONS, in new work, the flat (0.0%) growth rate was due to increases in private commercial new work and public new housing of 1.9% and 7.1% respectively, being counterbalanced by declines in private industrial new work and private new housing of 11.2% and 1.2% respectively. The ONS notes that the decline seen in the most recent month for private industrial new work follows growth of 12.3% in May 2019 and brings the series back to just below the levels seen in April 2019. Beyond these, public other new work saw an increase of 1.1%, whilst infrastructure fell by 0.6%.

Bad weather

Rebecca Larkin, Senior Economist at the CPA

Commenting on the figures released today, Rebecca Larkin, Senior Economist at the Construction Products Association, said: “The sharpest decline in construction activity was the 0.7% monthly fall in June, as a result of unseasonably bad weather delaying work on-site, particularly in the RM&I sectors, which account for around one-third of overall output. However, even though construction lost £521 million in output compared to Q1, the volume of activity was still higher than a year ago. This was driven by clear pockets of activity in house building by housing associations and local authorities, with public housing output reaching a record high level in Q2, and although output fell in quarterly terms for private housing and infrastructure, output from these sectors remains at a historically high level.

“The performance of other sectors such as commercial offices and retail, industrial factories is less convincing against the backdrop of Brexit uncertainty that complicates decision-making on investments with a high up-front outlay.”

Weaker housebuilding demand

Martin Bennison, Head of Construction at Ultimate Finance
Martin Bennison, Head of Construction at Ultimate Finance

Martin Bennison, Head of Construction at Ultimate Finance, added: “Today’s figures show the UK construction industry’s shrinkage is now more than a blip. The downturn indicated at the beginning of the year is now persistent with output continuing to fall throughout Quarter 2. This trend is mirrored in the number of enquiries coming into our specialist construction team. We’ve seen a 300% increase on this time last year in funding enquires from primarily supply chain companies looking for invoice finance facilities to shore up their cashflow.

“Clients are telling us they’re seeing weaker housebuilding demand, dented consumer confidence and high material prices. As tough as it is, let’s not underestimate them. Resilient SMEs involved in the construction supply chain will do what successful businesses do – make alternative plans and get their heads down until the situation begins to resolve itself.

“However, when politicians and economists reflect on today’s figures, it would be prudent for them to remember that the figures cited in today’s report are being reflected on the ground, and are literally affecting people’s livelihoods.”

Toxic Brexit

TUC General Secretary Frances O’Grady said: “Negative growth at home and weaker growth around the world is a major worry for workers and business.

“The Prime Minister’s toxic threat to crash out of the EU without a deal only adds to the alarm. It damages confidence in the economy, putting people’s jobs at risk. No responsible leader would contemplate inflicting such a crisis on the nation. The government should protect us from the current dangers by taking no-deal off the table and giving our economy urgent support through investment in
public services.”

The full ONS report is available to download here.

 

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