Data from the ONS, published today, shows that construction output rose 2.7% in January, but was 0.6% lower on a three-month basis, owing to weakness in three of the largest sectors of activity during the period: private housing, commercial and private housing repair, maintenance and improvement (RM&I). The ONS release also showed that the volume of new construction orders in 2018 Q4 fell 1.9% compared to Q3 and was 10.5% lower in annual terms.
Clive Docwra, Managing Director of leading construction consulting and design agency McBains, said: “The January figures are moderately encouraging, especially given the shadow of a no-deal Brexit looming large, which we expected to see reflected in a contraction – or at least a slowdown – in output.
“However, the real test of the resilience of the construction sector will be in the months to come. Many of our clients are telling us they are biding their time before they commit to investing in new projects until the whole Brexit situation becomes clearer, as evidenced by today’s statistics showing a fall in new orders over the last quarter of 2018. The next few months could prove to be a crunch point for the industry.”
Rebecca Larkin, Senior Economist at the Construction Products Association, commented: “Combined, private housing, commercial and private housing RM&I account for half of total construction output so any weakness in these sectors will provide an unavoidable drag on overall activity. The last three months of data have been as volatile as the political backdrop, but looking at the broader picture, output has remained at relatively high levels over the last 12 months.
“New orders in 2018 declined to the lowest level since 2012 and there are clear struggles to gain traction in the commercial and public housing sectors. Investment decisions on major offices and retail developments have stalled, not surprisingly, due to the lengthy period of economic uncertainty, but the record-low level of new orders in public housing is concerning given the government’s shift in policy focus to increase building by local authorities and housing associations.”
