Construction output gets back on track in Q2

The latest data release from the ONS, published today, shows that construction output rose 0.9% in the second quarter. This follows a 0.8% fall in Q1, in which activity was disrupted by severe weather conditions. Compared to a year earlier, output increased 0.8% and quarterly industry output has returned to £40.9 billion, matching the level recorded at the end of 2017.

The main points from the release are:

• Construction output grew by 0.9% in Quarter 2 (Apr to June) 2018, recovering from a 0.8% fall in Quarter 1 (Jan to Mar) 2018;
• The quarter-on-quarter increase in construction output in Quarter 2 2018 was driven by a 2.7% increase in repair and maintenance work, with all new work remaining flat;
• Following four consecutive months of contraction in the month-on-month series at the start of 2018, construction output increased by 1.4% between May and June 2018; this follows an increase of 2.9% between April and May 2018;
• The June 2018 month-on-month growth in construction output was driven predominantly by the continued growth in infrastructure new work, which increased by 9.2%.

Rebecca Larkin, Senior Economist at the Construction Products Association, said, “As expected, construction has caught up from its troubled start to the year, with strong growth in May and June as the warmer weather improved ground conditions for sites that stalled during February and March. The industry’s catch-up also helped drive the pickup in Q2 GDP growth to 0.4%.

“As much as it has been a tale of two quarters, there has also been a divergence by type of work. New build activity was unchanged from Q1 and was 0.4% lower than 2017 Q4, as rises in public housing, infrastructure and industrial output were offset by falls in private housing and public sector work. However, all repair and maintenance (R&M) activity rose 2.7% to a record high of £14.2 billion and is now 0.8% higher than at the end of 2017.”

Michelle Hannah, director at Cast, added, “Residential work has boosted construction activity in July, but concerns and questions remain around the quality of what the industry delivers. While surges in output are good news, we must ensure that they are sustainable in the long-term and that the model used to deliver housing and infrastructure is reliable.

“Currently, issues surrounding rising materials costs and the construction skills shortage are threatening the traditional way we build on-site. If we want to see a healthy level of construction activity, we must pursue industry modernisation to address the challenges ahead.”