Housing work delivers boost for construction sector

The UK construction industry, which suffered a shock contraction in March, has posted its largest growth for more than two years, buoyed by a rise in housebuilding.

The construction sector grew at its fastest pace in more than two years in April. Picture: Contributed
The construction sector grew at its fastest pace in more than two years in April. Picture: Contributed

The Office for National Statistics (ONS) said output lifted by 2.5 per cent in April – the largest month-on-month increase since January 2014.

This comes after the sector reported a surprise 3.6 per cent decline in March, the ONS said.

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Construction posts shock fall in March amid referendum uncertainty
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In April, construction growth was aided by a 1.9 per cent rise in repair and maintenance work, offsetting a 1.1 per cent month-on-month fall in infrastructure activity, which fell to its lowest level since December 2014.

However, the underlying performance of the sector remains sluggish as output in the three months to April fell 2.1 per cent compared to the previous quarter.

Howard Archer, chief UK and European economist at IHS Global Insight, said April’s “decent looking increase masks an underlying weak performance as it fails to fully make up for the 3.6% month-on-month drop seen in March when activity may well have been hit by the earlier Easter this year”.

He added that a Remain vote in the EU referendum on 23 June may not be enough to kick-start the long-term performance of the construction sector.

“If the referendum results in a vote to stay in the EU, the construction sector will obviously be looking to the reduced uncertainty to cause delayed projects to kick in,” Archer said.

“However, there is the concern for the construction sector that confidence and economic activity may not bounce back that well after the EU referendum and that clients remain reluctant to commit to major projects.”

In the first three months of the year, official ONS data reported that the construction industry fell by 1.2 per cent, compared to the final quarter of 2015.

Pantheon Macroeconomics chief UK economist Samuel Tombs said the failure of the construction industry to recover fully from its collapse in March “leaves the sector on course to make a negative contribution to gross domestic product growth in second quarter of the year”.

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Earlier this month, the closely-watched Markit/Cips construction purchasing managers’ index (PMI) said the sector was its weakest for almost three years in May amid “heightened uncertainty” over the EU referendum.

The PMI report showed a reading of 51.2 last month, down from 52 in April. A reading above 50 indicates expansion.