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Construction Output suffers slight decline, but orders remain positive

According to the Office for National Statistics (ONS), the construction industry is suffering a modest decline of 1.0% month-on-month, and 0.7% year-on-year, even with orders staying positive.
The ONS, who provide statistics for UK construction companies, recently released its output figures – statistics defined as the amount charged by construction companies to customers, excluding VAT and sub-contractors payments.

A 1.0% decrease was seen in July 2015, in the construction industry, whereas only a 0.9% decrease showed the month before. Meanwhile, all repair and maintenance showed no growth, and all new work decreased by 1.5%.

In comparison with July 2014, output decreased in the industry by 0.7%. This is the first year-on-year fall since May 2013, when it fell by 2.8%.

The Constructions Products Association (CPA), while at first dissatisfied with the ONS output figures, still remains positive with orders showing a growth of 1.9% year-on-year.

Rebecca Larkin, Economist at the CPA, said: “While it was initially disappointing to see the first annual decline in construction output since May 2013, we believe the industry is still fundamentally on course for growth over the coming years.”

Larkin suspects the declines may be led by a weak public housing sector due to the government’s focus on austerity and the resulting decrease in starts.

Larkin continued: “In addition, growth in the private housing sector was slightly less than we would have expected, though it remains a strong sector overall.

“On the positive side, output for both the infrastructure and industrial sectors was notably robust, up 17.3% and 4.9% on the previous year, respectively. These same sectors are also leading the rise in orders.”

Larkin also suspects the reason the commercial sector outputs have fallen 3.2% year-on-year is a result of rising costs that lead to project delays.

Larkin concluded: “Our own surveys along with many from across the industry, however, support our view that the outlook for the industry is positive. We forecast growth of 4.9% in 2015 and 4.2% in 2016, and 21.7% growth between 2015 and 2019.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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