Forecasted construction sector growth falls short

DISMAL official data yesterday revealed weaker than expected growth in the construction sector that followed on a sharp slide in output in the third quarter of the year.

Construction growth has become sluggish. Picture: Michael Gillen

Output in the sector – accounting for about 7 per cent of British GDP – edged up just 0.2 per cent in October, significantly undershooting City forecasts.

Chris Williamson of Markit said the pace of expansion in construction “remains surprisingly weak”. The Office for National Statistics also said that Q3 construction output was now estimated to have slumped by 1.9 per cent, heavily influenced by a 5.6 per cent fall in housebuilding.

The revised decline is slightly better than the previous estimated fall of 2.2 per cent. But Howard Archer, chief economist at IHS Global Insight, said that would only have “marginal implications” for hopes that GDP growth could be revised up from the currently reported 0.5 per quarter-on-quarter. Archer said that the fall in new housebuilding was “not what is needed given the UK’s acute housing shortage”. He also pointed out that the November data on the construction sector from Britain’s purchasing managers was also softer.

It came as the International Monetary Fund’s annual health check on the UK economy yesterday flagged a “clear” need for more housing in the UK, and hoped that recent changes to planning may accelerate new building programmes

The Scottish Building Federation welcomed the subdued return to growth in the construction sector, but warned other data had highlighted how it had become “overly reliant” on big infrastructure projects.

The ONS said infrastructure had risen to almost £4 billion (28 per cent) of total construction industry output over the year to September 2015.

That compares with about £1.5bn (13 per cent) over the 12 months to September 2008.