Construction pulls off ‘Houdini-like turnaround’
Output in the UK construction sector increased by 0.6% during the third quarter of the year following months of flat or falling figures, the latest Office for National Statistics report has shown.
The growth, which partially reversed the decrease of 1.2% in Quarter 2 (Apr to June) 2019, was driven by a rise in new work of 1.4% but offset slightly by a fall in repair and maintenance of 0.8%.
In new work, most sectors saw an increase with private housing (1.8%), private commercial (1.5%) and private industrial (7.2%) contributing significantly to the rise in Quarter 3 2019.
In repair and maintenance, the fall in Quarter 3 2019 was driven by a 3.0% decline in private housing and to a lesser extent a decline of 0.3% in non-housing.
Construction output decreased by 0.2% in the month-on-month all work series in September 2019; this was driven by a fall of 2.1% in repair and maintenance, which was partially offset by a rise in new work of 0.7%.
Mark Robinson, Scape Group chief executive, said: “It’s very promising to learn that new work increased by £253 million over the third quarter of this year despite the prolonged period of political turmoil.
“Particularly after months of construction output contracting. But while the UK has avoided a recession by the skin of its teeth, there is still a long way to go until we experience any kind of bounce back in business optimism and we still need to see the government seriously commit to propping up industry skills and funding in the lead up to January 31st and beyond.”
Gareth Belsham, director of the national property consultancy and surveyors Naismiths, added: “Construction has emerged as the economy’s ‘comeback kid’. After months of flat or falling output, the sector came out swinging in the third quarter.
“While the huge size of Britain’s service sector means it must take the bulk of the credit for dragging the economy back to growth, construction deserves plaudits for pulling off the most Houdini-like turnaround.
“Activity is growing strongly, and the growth is refreshingly broad-based – with new infrastructure, commercial and residential building all up.
“The reversal of fortune is no overnight miracle. Brexit fears still stalk investors’ calculations, even if concerns have been soothed somewhat by the growing sense that a chaotic ‘no-deal’ exit is becoming less likely.
“Instead what we’re seeing is a gradual uncorking of some of the demand which has been repressed for months or even years. There is only so long that mothballed projects can be delayed, and while conditions are far from perfect, a steady stream of tactical investors is now sensing that opportunities can now outweigh the risks.
“This is no opening of the floodgates, but they are ajar – and deals are beginning to flow once again.”
Fraser Lynes, managing director of Cruden Homes (West), said: “It’s encouraging to see a rise in output activity in the sector. Certainly at Cruden Homes we are seeing continued confidence in the housing market and as a result, we have released new phases of development months ahead of schedule, and the accelerated release of a new development, to cope with the unprecedented levels of demand.
“There remains a need to provide more quality affordable homes in Scotland and the key to delivering this is to increase the speed at which housing developments go through the planning process so that proposed developments are agreed quicker and more effectively.”
Clive Docwra, managing director of construction consulting and design agency McBains, added: “These latest figures reflect the uncertainty the sector is currently experiencing.
“They show an increase in new work over July to September, and in particular higher than expected increases in housing, commercial and industrial new work, but a slowdown in September itself.
“We expect this slowdown to continue over the next few months, especially given last month’s confirmation of a further delay in Brexit.
“Business and investors hate uncertainty, so the continuing saga of if and when the UK leaves the EU, plus the added unpredictability of the general election, means there will be a continued reluctance to commit funding to new projects.
“We also need to see the major parties make strong policy commitments to boost the housebuilding programme, which is failing to deliver the number of homes required to meet the housing shortage.”