GB post-Brexit fall

The first quarterly estimate for construction output in Great Britain from the Office for National Statistics (ONS) since Brexit (the decision to leave the European Union) has shown a decrease compared with the previous quarter.

The third quarter – July to Sept 2016 – output in the construction industry was estimated to have decreased by 1.1% compared with the April to June period.

The figures follow a recent survey from the UK’s Construction Products Association, which showed that construction in the UK (GB plus Northern Ireland) was growing, despite the post-Brexit pessimism.

In its latest estimate, the ONS said that the gross domestic product (GDP) preliminary estimate had shown that construction output had decreased by 1.4%. It said, however, that the revision to a decrease of 1.1% had no impact on GDP to one decimal place.

It said that downward pressure on the quarterly estimates had come from all repair and maintenance, which decreased by 3.6%, partially offset by an increase in all new work of 0.3%.

Between the third quarter of 2016 and the same period in 2015, output was estimated to have increased by 0.1%. All new work increased by 2.0% while there was a fall of 3.4% in repair and maintenance.

In September 2016, construction output increased by 0.3% compared with August 2016. All new work increased by 1.2% while there was a fall in repair and maintenance of 1.4%.

On the year, output increased by 0.2% in September 2016 compared with September 2015.

Contractions

The ONS said that in the first quarter of 2016, construction output had surpassed the peak seen in first quarter of 2008, and following contractions in the second and third quarters this year, it had dropped 0.9% below this peak.

It added, however, that new work remained 6.5% above the first quarter of 2008, but that repair and maintenance was dragging all work down and had yet to surpass this 2008 level.

The recent contractions in this type of work, said the ONS, meant that it was still negative – 5.1% below the first quarter of 2008.

It said that total new housing saw no growth compared with the previous quarter, while infrastructure increased by 1.2%. This is the first quarter-on-quarter increase in infrastructure since the second quarter of 2015.

Compared with the same period a year ago, there was a fall of 7.7% in infrastructure. All new housing increased by 8.7% which was the largest quarter-on-quarter increase since the first quarter of 2015.

The ONS said that other new work had remained fairly flat in recent periods and that the third quarter of 2016 had been no exception, showing no growth compared with second quarter of the year. Compared with the third quarter of 2015, there had an increase of 2.2% in other new work, it said.

‘More positive’

Rebecca Larkin, senior economist at the UK’s Construction Products Association, said, “While today’s figures show a contraction in construction output, surveys across the industry have painted a more positive picture of continued increases in construction activity during the quarter.”

She said this suggested that official data were likely to be revised up further as more data became available.

“Certainly, the ONS data show that new construction work remains the primary driver of activity, rising by 0.3% during the quarter. In contrast, repair and maintenance work was reported to have fallen by 3.6%,” she said.

“Despite the contraction in the third quarter, the rise in new orders in the second quarter, along with broadly positive expectations expressed in industry surveys, points to a favourable performance over the rest of the year.

“For the year to date, overall construction output remains 0.6% higher than a year ago.”

Michael Thirkettle, chief executive of leading interdisciplinary international construction and property consultancy McBains Cooper, said, “These figures are an obvious continuation of post-Brexit uncertainty, but we remain optimistic about the long-term picture.

“The weak pound is also a continuing concern as it means increased costs of materials, although this may be balanced out by increased Asian and US investment in construction projects in the UK.”

He added, “Brexit also threatens to choke the supply of skilled migrant labour from the EU on which the industry is heavily reliant, so skills shortages also need to be addressed.”