17 March 2014

ONS construction figures underline industry optimism

New figures from the ONS show that construction output in January was up by 1.8% compared with December.
In addition, new orders for the final quarter of 2013 increased by 1.5% compared to the third quarter, providing positive signs for the industry looking forward.

Economics director at the Construction Products Association (CPA) Dr Noble Francis, said: 'The construction industry continued to see a recovery in activity. Output in January was 5.4% higher than snow-affected January 2013.

'New orders are an early indicator of future output, so the 1.5% rise during the final quarter of 2013 suggests that the growth in activity is also likely to continue over the next 12-18 months.

He continued: 'Private housing was the key driver of construction growth in January with sector output 23.3% higher than a year earlier. New orders for private housing in Q4 rose 7.2% compared with Q3 and indicate growth for the sector in 2014 and 2015. The Association forecasts that private housing starts will rise 16% this year and a further 10% in 2015.

He also pointed out that output in public non-housing looks set for a recovery. In January output was 2.2% higher than a year earlier and new orders in Q4 were 16.8% higher than in Q3, indicating possible sector growth this year.

However, Dr Francis warned: 'Despite many government announcements of finance for large infrastructure projects over the last two years, output in the infrastructure sector fell by 2.3% in January compared with December and was 3.2% lower than a year earlier.

'Of greater concern, infrastructure new orders in Q4 were 22.2% lower than in Q3. Therefore, it is vital that the government focuses on delivery of existing projects in the pipeline rather than further announcements.'

Paul Connolly, managing director of cost management at global construction consultancy Turner & Townsend, said: 'The recovery is real - but dotted with caveats. Such mixed data neatly illustrate both the strengths and the weaknesses of the construction industry's progress.

'The headline figures are impressive - with growth of 1.8% in January alone, total output is now half a billion pounds higher than it was at the same time last year. And the overall pipeline picture is rosy - new orders in the last quarter of 2013 were up 1.5% over the previous three months.”

He continued: 'But much of this growth is heavily focused on housebuilding. Outside the buoyant residential sector - which is up by a truly remarkable 35% in a year - things are much less encouraging. Infrastructure output sank by 2.3% in January - and is 3.2% down on the same time last year.”

Mr Connolly went on to say: 'But while the boom in housebuilding says much about consumer confidence, the continued stagnation in infrastructure is a worry. The £100bn promised in last year's Spending Review won't begin to flow into UK infrastructure for another year.

'Construction has always been a barometer of economic sentiment, but at its best it can also drive truly broad-based economic growth. It's great that the industry is responding to the surging demand for homes; but until the funding environment for infrastructure projects improves, construction will struggle to fulfil its full potential as an engine of growth for the wider economy.'

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