Value of work in private housing falls £95 million in July

The latest ONS data shows that construction output in July fell by 0.9% and was 0.4% lower compared with one year earlier. In addition, new orders in Q2 declined 7.8% and fell 12.6% on an annual basis.

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 24.9% higher than the lowest point of the last five years, January 2013. Despite falling in July 2017, construction output remains 21.0% above this level.

All new work, which accounts for approximately two-thirds of all work, fell 1.4% month-on-month in July 2017, following growth of 0.3% in June 2017.

All work showed a net fall of £105 million in July 2017 compared with June 2017. The decline was broadly driven by falls in private housing and infrastructure. Following strong growth in June 2017, private housing fell by £95 million, representing the main downward pressure on construction output.

In contrast, public housing provided the most notable positive month-on-month contribution to all work in July 2017, increasing by £18 million compared with June 2017.

All new housing has been relatively flat since 2013 and is showing a recovery from the downturn in 2009.

All new work has fallen markedly in Quarter 2 2017, dropping to its lowest level since Quarter 1 2014; at £11,781 million. The decrease has been driven by a decrease in both all new housing and all other work. All new housing fell for the fourth consecutive quarter in Quarter 2 2017, falling to £3,631 million. All other work showed a sharper decrease, coming after small growth in the previous quarter, falling to its lowest level since Quarter 4 (Oct to Dec) 2013; at £8,150.

New orders fell 7.8% quarter-on-quarter in Quarter 2 2017, to a value of £11,781 million. This represents both the biggest percentage fall and lowest value since Quarter 1 2014. The most notable downward pressures on quarter-on-quarter growth came from private commercial work, which fell 15.6% and all new housing, which fell 4.9%.

New orders also fell quarter-on-year, decreasing by 12.6% compared with Quarter 2 2016. All sectors, bar private industrial, fell in comparison with the same period in the previous year. However, it must be noted that Quarter 2 2016 was a record high for new orders.

Rebecca Larkin, Senior Economist at the Construction Products Association, said, “Today’s data from the ONS confirms that alongside a 1.3% contraction in output in Q2, new orders in construction hit the lowest level since 2014 Q1.

“In particular, the sectors suffering the largest falls were the industry’s largest three; private housing, commercial and infrastructure: private housing, commercial and infrastructure. “Commercial new orders began tailing off in the second half of 2016 and are 11.2% lower since the EU Referendum. Whilst this downward trend was expected amid the rising uncertainty giving way to a reluctance to invest in new offices space, private sector house building and infrastructure are the key drivers of growth in the CPA’s forecasts for 2018 and 2019. New orders in these key sectors were the lowest since 2015 and highlight that there are now lower volumes of work queued up in the pipeline.

“Nevertheless, for the year to date, construction output is still 1.3% higher than a year ago. The weakness in new orders is factored in to the CPA’s forecasts for 2018, with construction growth slowing to 0.7% as activity on projects reaching an end is not replaced at the same rates.”

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