Category: UK Construction Industry

UK construction output rise 2.2% driven by housebuilding

Rise in construction output likely to add an extra 0.1 percentage points to third quarter GDP, says ONS

UK construction output grew solidly in October, led by the biggest rise in housebuilding in more than two years.

An upward revision to construction output in the three months to September is also likely to add an extra 0.1 percentage points to third quarter gross domestic product growth, the Office for National Statistics said.

Construction output rose 2.2pc on the month in October after a fall of 0.5pc in September. On the year, output is up 5.3pc, slowing from an 8.2pc increase in September, which was the biggest since January 2011.

This marks a big turnaround from 2012, when construction output fell by 7.5pc and was a major drag on overall growth, despite its small share of just over 6pc of the economy.

Separate private-sector surveys had reported the biggest expansion in construction activity in over six years in October and November, and Friday’s official data also suggest the sector will make a strong contribution to overall economic output.

Britain’s economy grew by 0.8pc in the three months to September, the strongest quarterly growth in three years, according to an early estimate, and further revisions will be published on December 20.

The turnaround in construction this year is down to a marked revival in house-building, driven by a government scheme to aid buyers of new homes and a rebound in house prices, which are up nearly 8pc on the year according to mortgage lender Halifax.

This is the biggest rise in over six years, and fears of a possible bubble prompted the Bank of England late last month to announce it would scrap the part of its Funding for Lending Scheme that supports mortgage lending.

But this alone is unlikely to stop further rises in house prices. The government expanded another scheme to help home-buyers with low deposits in October, and in a set of economic forecasts last week it predicted that house prices would rise by a further 5pc next year and by 7pc in 2015.

The ONS said that new housing grew by an annual 18.6pc in October, the biggest rise since January 2011.

However overall construction levels remain well below those seen before the crisis, and what economists think is needed to meet demand.

Just 135,000 homes were built in the year to April 2013, down from the more than 200,000 homes a year that were built in the years running up to the financial crisis, government figures show.

Most other construction sectors have yet to return to solid growth. Infrastructure building is 2.8pc lower than last year, public building works are down by 6.8pc and private industrial work is 26.0pc lower. Private commercial work is growing at an annual rate of 8.7pc, however.

The government’s Office for Budget Responsibility predicts a pick-up in business investment next year, and last week the government also said that insurers were willing to commit £25bn to long-term infrastructure projects.


UK Construction Industry at three-year high, PMI survey indicates

The UK’s construction industry has reached its highest level of activity since June 2010, a survey has indicated, boosted by a continuing surge in house building.

The Markit/CIPS Construction Purchasing Managers’ Index (PMI) rose to 57.0 in July from 51.0 the month before.

A figure above 50 indicates expansion.

“July’s survey highlights a new wave of optimism across the UK construction sector,” said Markit senior economist Tim Moore.

He added that construction firms were reporting “a pace of expansion in excess of anything seen over the past three years”. The government announced measures in March 2013, such as Help to Buy, to support people looking to buy their first home and to spur construction of new properties.

The construction sector has been an area of weakness in the UK economy.

First estimates for second-quarter GDP show the construction sector grew by 0.9%, but it still remains more than 16.5% lower than it was before the start of the financial crisis in 2008.

Overall GDP growth for the April-to-June period was 0.6%.

Howard Archer, chief European and UK economist for IHS Global Insight, hailed the survey as “more good news for the UK economy, with the construction sector seemingly increasingly shrugging off its long-term problems and now contributing to growth”.

On Thursday, the PMI survey for manufacturing indicated that the sector grew in July at its fastest pace for more than two years.

The reading of 54.6 for last month, from an upwardly revised June figure of 52.9, was the strongest since March 2011 and marked the fourth month in a row of expansion.

PMI surveys are based on data from various private-sector firms, which supply information on factors such as output, new orders, stock levels, employment and prices.