Private housebuilding nudges construction output upwards

October 10, 2017 / Isla MacFarlane
Private housebuilding nudges construction output upwards

According to the latest ONS data, construction output grew 0.6% month-on-month in August, predominately driven by 1.7% rise in all new work; the month-on-month rise in all new work stemmed from private housing, which grew by 2.3% and infrastructure, which increased by 3.6%.

Compared with August 2016, construction output grew 3.5%. As in the three month rolling time series, housing growth was strong, with public housing up 14.9% and private housing up 7.5%. Month-on-year growth was seen across all types of work in August 2017, with the exception of public other new work, which experienced its fifth consecutive period of month-on-year contraction, decreasing by 7.4%.

The annual growth rate for 2016 has been revised from 2.4% to 3.8% and the leading contribution to this increase is infrastructure, which itself has been revised from negative 9.2% to negative 3.2%.

In the three month on three month time series, however, construction output fell for the fourth consecutive month.

“Output contraction in the construction sector should not surprise anyone,” said Mark Farmer, CEO of Cast and author of a government-commissioned review into the construction industry. “The mild growth in August came from private housebuilding, but we are still not anywhere near the output required across the overall housing market.

“We are likely to be entering turbulent times and there is now a great opportunity for government to play a role in ‘smoothing’ industry demand so it remains more stable across both infrastructure and building construction. That stability will be important if we are to accelerate our modernisation journey as longer term investment confidence is needed. We do not want more cycles of ‘boom or bust’, healthy and stable overall demand should be the aim with growth coming through productivity gains.”

However, despite these recent consecutive declines, construction output still remains at a relatively high level. Construction output peaked in January 2017, reaching a level that was 29% higher than the lowest point of the last five years, in January 2013. Despite the three month on three month series falling in August 2017, construction output remains 27.3% above this level.

All new work grew 1.7% month-on-month in August 2017, recovering from a contraction of 1.5% in July 2017. All work fell by £312 million in August 2017, the fourth consecutive three month on three month decline in construction output. This fall stems from a £220 million decrease in private commercial work, as well as a fall of £167 million from public other new work.

Elsewhere, the strongest positive contributions to three month on three month output came from private housing, which increased by £140 million and private industrial work, which grew by £79 million.

All work increased by £75 million in August 2017 compared with the previous month. The increase was mainly driven by rises in private housing and infrastructure, which grew by £61 million and £54 million respectively.

Neil Knight, Business Development Director of Spicerhaart Part Exchange & Assisted Move, said, “Thanks to an increase in private house building and infrastructure, construction in the UK defied expectations in August. However, overall, growth in the sector remains sluggish.

“As a result of the government’s Housing White Paper, it seems that initiatives to help relax planning regulations and permissions are finally starting to take effect. By reducing obstacles to housebuilding, this will hopefully help developers, SME builders and local authorities to build the homes that the country needs to meet the growing demand from a growing and ageing population.

“The lack of skilled labour in construction continues to affect the market, more so than the new build one. With not enough stock of existing homes coming to the market, the country’s growing interest in new build homes is set to continue. It is helping to satisfy demand and this will encourage developers to build more new homes as they can be confident that the properties will sell.”

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