ONS: Construction output grows but new orders hit five-year low

Output in the UK construction sector continued to recover following a relatively weak start to the year, increasing by 3.3% in the three months to July 2018.

The three-month on three-month growth in July 2018 was driven by growth in both repair and maintenance, and all new work, which increased by 5.3% and 2.3% respectively.

Latest data from the Office for National Statistics (ONS) also revealed that construction output grew in the month-on-month series, increasing by 0.5% in July 2018, driven predominantly by a 4.0% increase in new private housing work.

However, total construction new orders declined 6.5% in Quarter 2 (Apr to June) 2018, decreasing for the third consecutive quarter, reaching its lowest level since Quarter 1 (Jan to Mar) 2013.

The quarter-on-quarter decrease in construction new orders in Quarter 2 2018 is driven predominantly by a 17.6% fall in new housing orders, which fell to a similar level seen in Quarter 4 (Oct to Dec) 2017, following strong growth in Quarter 1 2018.

Commenting on the numbers, Allan Callaghan, managing director of Cruden Building, said: “The country is in desperate need for new housing and demand in the housebuilder sector remains strong. We’re seeing a continued interest for affordable, quality homes across Scotland, providing a welcome boost to the construction industry as a whole.

“However, the perennial problem is the length of time it is taking for both private and social housing developments to go through the planning process. This has been compounded by the slow pace and lack of substance outlined in the Scottish Government’s planning review.

“A steady pipeline of quality and affordable housing is vital to the health of the Scottish economy. Fundamental considerations to the Planning Bill urgently need to be addressed so that proposed developments are agreed quicker and more effectively, allowing Scottish families to have the modern, quality housing that they so badly need.”

Mark Robinson, Scape Group chief executive, added: “The construction industry experienced a welcome boost in the three months to July as firms continued to shake off their disappointing start to the year. Whilst the spring bounce back may have occurred late in 2018, it is promising to see that activity on the ground ramped up as soon as the hot weather hit. Output increased by a massive £1.34 billion, which included a large jump in new work – particularly encouraging given the current macro environment.

“However, disparities between sector outputs are clear. Private housing continued to carry the industry in the three months to July, whilst public housing slipped into decline. In order to truly address housing need in the country, we need a collaborative effort between the public and private sectors. It is vital that the Government equips local authorities with the funding powers to deliver new homes and that the industry focuses on modern methods of construction to deliver homes efficiently and effectively.

“With only six months to go until the UK’s EU exit date, it is absolutely essential that the Government does all it can to keep the current optimism going. Greater clarity is critical to prevent current confidence waning, and quick and bold decisions now on both long and short-term projects would go some way to continuing this momentum through the remainder of the year.”

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