UK construction output weakest in four years

The UK construction industry recorded its weakest performance in four years in this year’s third quarter, according to new data from the Office for National Statistics (ONS).

Construction output fell by 1.1% in the July to September quarter, compared with the prior three-month period.

The report shows that there were significant falls in repair and maintenance work, partly offset by small rises in infrastructure and public building work.

Between the third quarter of 2015 and the same period in 2016, output was estimated to have increased by 0.1%.

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

Despite the quarterly decline, the construction figures are better than preliminary estimates. When the ONS published its first estimate of GDP figures last month, it forecast a 1.4% fall in construction activity.

However, the statistics agency said that the upward revision to construction output would have no impact on the GDP growth figures.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that the sector still faces significant challenges.

“The construction sector’s outlook will brighten if the chancellor cancels planned cuts to public sector investment in the Autumn Statement later this month. But unlike other indicators, firms’ investment intentions have not recovered since the Brexit vote, so commercial construction still looks set to weaken,” Tombs commented.

“Meanwhile, demand for new homes likely will deteriorate next year as households’ real incomes are squeezed by high inflation and as lenders reflect the recent sharp rise in funding costs in mortgage rates.”

Additional challenges in the construction sector include skills shortages, according to Kay Daniel Neufeld, economist at the consultancy Cebr, who told the Guardian: “Stricter immigration controls would further exacerbate the problem for the UK construction sector.”