Construction output increases, but growth remains fragile

Showhouse, 11/03/2020

Construction output has inched up over the last three months, as sites dried out following adverse weather at the end of last year. However, the outlook is clouded by the coronavirus and an uncertain economy.

Construction output increased by 1.4% in the three months to January 2020, compared with the previous three-month period, driven by 2.4% growth in new work.

The rise in new work in the three months to January 2020 was because of growth in all sectors, with the largest positive contributions coming from private housing, private commercial and infrastructure, which increased by 2.4%, 2.1% and 1.7% respectively.

Clive Docwra, Managing Director of leading construction consulting and design agency McBains, said: “The construction sector will give a cautious welcome to these figures, in particular positive growth in private housing, private commercial and infrastructure work.

“Underlying long-term growth is still fragile however, with the figures showing volatile patterns over previous months, and the industry will be looking with interest at the Chancellor’s budget later today for any announcements that will give the sector a much-needed boost.

“Clarity on growth over the next few months is doubly important as the impact of coronavirus is an unknown quantity. If workers have to self-isolate, this will trigger a dip in activity, and if financial market values continue to fall then this will also have an impact on investors’ capacity to commit to new projects.”

Construction output decreased by 0.8% in the month-on-month all work series in January 2020; this was driven by a 2.4% fall in repair and maintenance as new work saw flat growth.

Construction output increased by £568 million in the three months to January 2020 compared with the previous three months. This three-month on three-month growth is the strongest since April 2019.

The increase seen in the three months to January 2020 is partly because of the volatile monthly pattern of construction output in the last quarter of 2019, when anecdotal evidence suggested that adverse weather conditions watered down activity.

Jan Biggins, national sales manager at Spicerhaart Part-Exchange and Assisted Move, said: “The ONS construction data for January presents a very mixed picture of the housing market. It is not unusual for output to drop off in the New Year, so the 1% drop in new housing output from December shouldn’t cause undue alarm.

“Looking at a longer-term perspective, the three months to January saw an increase in output of 2.6% compared to the previous three months, and this was 5.2% higher than the same period a year ago. This picture of steady but unspectacular growth is broadly in line with our own experience on the ground, where we are seeing plenty of new developments coming onstream.

“The big question now is what impact the coronavirus will have. The housing market resembles a game of snakes-and-ladders at the moment: having just about negotiated the political and economic uncertainty around Brexit, we could find ourselves sliding down a big snake marked ‘Covid-19’ and ending up back at square one. But it’s important to remember that while the virus may set things back, it will not be here forever. We all need to work together to ensure any impact is only temporary and we can get back to climbing those ladders again.”

https://www.showhouse.co.uk/news/construction-output-increases-but-growth-remains-fragile/

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