UK construction industry enters recession?news
21st November 2017
The trade gap in the construction industry has shrunk by £700 million to £2.75 billion over the last quarter, with the sector slipping further into a potential recession situation as the UK economy falters under the weight of Brexit.
Recent data released by the Office for National Statistics (ONS) show that construction output decreased by 0.9% in the third quarter (Q3) of this year.
For the first time since 2012, there have been two consecutive quarters of decline. This result is even worse than October's original estimate of a 0.7% decline, which follows a 0.5% fall in output recorded in Q2.
The decline is due to decreases in repair and maintenance contracts (down 1.4%), and all new work contracts (down to 0.7%).
In real terms, construction output fell by £361 million in September, with a £236 million decrease in private commercial new work and a drop of £165 million in repairs and maintenance contracts. Interestingly, the sector's best results were seen within housing new work; private housing grew to £138 million and public housing expanded by £65 million.
IHS Markit’s Chief Business Economist, Chris Williamson, said the data pointed to a 'multi-speed economy' backed up by the fact that ONS figures show industrial production and manufacturing have enjoyed periods of sustained growth this year.
Remarking on the data, he said: “According to data from the Office for National Statistics, both industrial production and manufacturing output surged 0.7% in September, notching up the best performance so far this year."
Senior economist at the Construction Products Association (CPA), Rebecca Larkin, commented: “At a headline level, today’s data shouts ‘construction recession’, marked by two consecutive quarters of falling output. However, output remains at relatively high levels – 1.1% higher than a year ago and 7.1% higher than 2015 Q3.
“Nevertheless, areas of weakness include private commercial, where new orders have fallen for three quarters and signal a lack of offices and retail projects to replace those now coming to an end. This is echoed in the public non-housing sector, which is suffering from lower volumes of work on schools and a dearth of new large hospitals projects."
Written by Ian Johnson