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UK construction industry buoyed by rise in housebuilding

Published 10/06/2016

The UK construction industry posted its largest growth for more than two years in April buoyed by a rise in housebuilding
The UK construction industry posted its largest growth for more than two years in April buoyed by a rise in housebuilding

The UK construction industry posted its largest growth for more than two years in April buoyed by a rise in housebuilding - following a shock fall the previous month.

The Office for National Statistics (ONS) said output lifted by 2.5% in April, compared with a month ago, the largest month-on-month increase since January 2014.

This comes after the sector reported a surprise 3.6% decline in March, the ONS said - due to falls in the amount of new work being carried out as well as repair and maintenance activity.

In April, construction growth was also aided by a 1.9% month-on-month rise in repair and maintenance work, offsetting a 1.1% month-on-month fall in infrastructure activity which fell to its lowest level since December 2014.

However, the underlying performance of the sector remains sluggish as output in the three months to April fell 2.1% compared to the previous three months.

Howard Archer, chief UK and European economist at IHS Global Insight, said April's "decent looking increase masks an underlying weak performance as it fails to fully make up for the 3.6% month-on-month drop seen in March when activity may well have been hit by the earlier Easter this year".

Mr Archer added a vote Remain in the UK's Brexit poll on June 23, may not be enough to kick-start the long-term performance of the construction sector.

He said: "If the referendum results in a vote to stay in the EU, the construction sector will obviously be looking to the reduced uncertainty to cause delayed projects to kick in.

"However, there is the concern for the construction sector that confidence and economic activity may not bounce back that well after the EU referendum and that clients remain reluctant to commit to major projects."

In the first three months of the year, official ONS data reported that the construction industry fell by 1.2%, compared to the final quarter of 2015.

Pantheon Macroeconomics chief UK economist Samuel Tombs said the failure of the construction industry to recover fully from its collapse in March "leaves the sector on course to make a negative contribution to gross domestic product growth in second quarter of the year".

Earlier this month, the closely-watched Markit/CIPS construction purchasing managers' index (PMI) said the sector was its weakest for almost three years in May amid ''heightened uncertainty'' over the EU referendum.

The PMI report showed a reading of 51.2 last month, down from 52 in April. A reading above 50 indicates expansion.

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