Construction sector figures show fresh decline

Construction output shrank 0.9% in June, the ONS said. Picture: Christopher Furlong/Getty Images
Construction output shrank 0.9% in June, the ONS said. Picture: Christopher Furlong/Getty Images
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Construction industry leaders remained upbeat today despite new figures showing the sector continued to decline in June, raising fresh fears over the resilience of the wider economy.

The Office for National Statistics said UK construction output fell by 0.9 per cent in the month of the Brexit vote, compared to a 2.1 per cent fall in May. The latest fall was not as bad as some economists had feared.

These figures will cause disappointment throughout the Scottish construction sector

Allan Callaghan, Cruden Building & Renewals

Output was down 0.7 per cent for the second quarter compared with the first three months of the year, and was 1.4 per cent lower in contrast to the same month in 2015.

Mark Robinson, chief executive of publicly-owned procurement group Scape, said: “Although a fall in output was somewhat guaranteed, it is positive to see that output fell at a slower pace than the previous month.”

The official figures come after the latest Markit/Cips construction purchasing managers’ index (PMI) showed that the sector had recorded its fastest fall since June 2009 last month, with a reading of 45.9 for July, down slightly from 46 in June but above economists’ expectations of 44. Any reading below 50 denotes a decline.

READ MORE: Construction activity drops in wake of Brexit vote

Allan Callaghan, managing director of Scottish firm Cruden Building & Renewals, said he remained cautiously optimistic over the industry’s prospects. “While these figures will cause disappointment throughout the Scottish construction sector, they will come as no surprise to those on the ground,” he said.

“They do however follow welcome news this week with the Scottish Government’s attempt to stimulate the economy by making an additional £100 million available for infrastructure projects.

“As we face what is expected to be a period of uncertainty compounded by economic challenges, alongside an anticipated rise in material costs and the fall of sterling, we may well see further reductions in the coming months.

“But this is no worse than what the sector has faced in previous years and we face the headwinds and economic challenges face on.”

READ MORE: Scottish Government to implement infrastructure stimulus plan

Ed Monaghan, chair of Construction Scotland’s industry leadership group, said the extra investment “will go some way to building confidence given recent uncertainty in the marketplace”.

Monaghan added: “To maintain this momentum, Construction Scotland firmly believes that the industry needs certainty, and clear line of sight of such strategic investments over the coming years.”

The ONS said the decline in the three months to June was driven by a 0.8 per cent drop in all new work, while repair and maintenance was 0.5 per cent lower.

It added that the second quarter fall was revised to 0.7 per cent from its initial estimate of 0.4 per cent made at the end of July, but this change did not affect its estimate for gross domestic product (GDP) for the period.

GDP grew by 0.6 per cent for the second quarter, up from 0.4 per cent in the opening three months of 2016, thanks to the strongest performance from industrial production since 1999. However, analysts expect growth to tail off.

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