UK construction weakest in four years, ONS says

Cranes and building Image copyright AFP

The UK's construction sector recorded its weakest performance in four years in the July-to-September quarter, official figures have shown.

Construction volumes fell by 1.1% in the quarter, the Office for National Statistics (ONS) said.

There were large falls in repair work, and these were only partly offset by small rises in infrastructure and public building.

The figures measure the first three months following the Brexit vote.

The value of all repair and maintenance was 3.6% lower than in the second quarter of the year, which was partially offset by an increase in all new work of 0.3%, said the ONS.

Further evidence of a slowdown in the construction industry came from building materials and insulation firm SIG on Friday, as it issued a profit warning and said its chief executive was stepping down.

The company said: "Following a slowing of activity around the time of the EU referendum, trading conditions in the UK have continued to soften and competition in the market has intensified."

SIG also said that some commercial projects had been delayed.

'Light appearing'

Despite the overall decline across the sector, the construction figures are better than had been indicated when the ONS published its first estimate of GDP figures last month, when it forecast a 1.4% fall in construction activity.

However, the ONS said that the upwards revision to construction output would have no impact on the GDP growth figures.

ONS statistician Kate Davies said. "Construction output has remained broadly flat in the last year, both before and after the recent referendum."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the outlook for the sector was uncertain: "The downturn in construction output in Q3 [the third quarter] is shallower than the ONS initially estimated, but the sector still faces severe challenges ahead."

However, Chris Williamson, from IHS Markit, which compiles the closely-watched Purchasing Managers' Indexes (PMI), saw positive indicators in the data.

"There's light appearing for beleaguered builders" he said.

"First, the downturn had been signalled in advance by survey data which have since revived. The Markit/CIPS PMI survey has shown construction industry output rising in both September and October, with the rate of growth accelerating to the highest since March.

"Second, the official data lag behind the survey but likewise recorded an upturn in the month of September, with output up 0.3% compared to August."

The ONS figures measure construction output by both private sector and public corporations, and are taken from a survey of 8,000 businesses."

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