Home News Construction output falls in final quarter of 2018

The latest construction output figures published by the ONS showed that  all work decreased by 0.3% in Quarter 4 (Oct to Dec) 2018, following an increase of 2.1% in Quarter 3 (July to Sept) 2018; this decrease was driven by repair and maintenance output, which was down by 2.8%.

Residential work fell 6.8% while infrastructure and commercial output rallied in the final Quarter of 2018 with increases of 1.9% in infrastructure and 1.4% in private commercial new work.

When compared with 2017, the level of all work in 2018 saw a 0.7% increase; this was the lowest annual growth since 2012, which saw a 6.9% decrease in annual output.

The Construction Products Association’s (CPA) Construction Trade Survey for 2018 Q4 has also shown mixed results during the final quarter. Sales of construction products rose according to 55% of heavy side manufacturers and 21% of light side manufacturers, whilst 25% of SME builders reported an increase in workloads.

However, the CPA said that output, new orders and enquiries were reported lower by main building contractors, specialist contractors and civil engineering contractors. Rising costs for raw materials continued to filter through the supply chain, as reported by two-thirds of main contractors, 82% of heavy side product manufacturers and 74% of light side manufacturers and combined with lower volumes of work, continued to squeeze profit margins for building contractors.

Clive Docwra, managing director at McBains, said: “(The) figures show a mixed picture – unsurprising given concerns about the UK economy and whether it can withstand a no-deal Brexit.  These fears, coupled with longer running issues such as high import costs and skilled worker deficits, are now cutting through and impacting key investment decisions.

“To turn the corner, the industry needs confidence and the support of the Government. The Brexit uncertainty will need clarifying soon if the sector is to push on and build the homes our country needs.”

Blane Perrotton, managing director of Naismiths, commented: “Few sectors have seen the economic brakes slammed on as hard as construction.

“Builders’ booming third quarter – in which output rocketed by 2.1% – feels a lifetime away While the final quarter of 2018 can be filed under ‘slowdown’ rather than ‘slide’ – just – such distinctions are moot in an industry which has been stripped of confidence and momentum.

“The prime suspect in construction’s reversal of fortune is its previously gravity-defying housebuilding sector. A 6.8% drop in new work consigned residential construction to also-ran status, with what little growth there was coming from commercial and infrastructure work.

“Against this grim backdrop, confidence is ebbing away. Last week’s PMI data showed sentiment has plunged back towards the deep-frozen lows of last March, and official insolvency figures confirm nearly 3,000 construction firms went to the wall in 2018; the highest failure rate of any business sector.”

Rebecca Larkin, Senior Economist at the CPA, said: “Parts of the construction supply chain have clearly started to feel the effects of the falls in new orders since the EU referendum translating into reduced activity in sectors such as high-end residential, commercial offices and industrial factories. The uncertainty that precludes investment decisions in these sectors with a high upfront outlay may also be benefiting other areas of the supply chain.”

Brian Berry, Chief Executive of the Federation of Master Builders, said: “Workloads for small construction firms continued to rise in the last quarter of 2018 but after 23 consecutive quarters of growth, these latest results could mark a tipping point. Mounting Brexit uncertainty is starting to have a tangible effect and the indicators are not good with almost half of builders reporting signs of a weakening housing market.”

Build UK Policy Manager, David Bishop said: “The latest State of Trade result highlights a difficult Q4 with half of main contractors and a quarter of specialists reporting a decrease in output compared to this time last year. Furthermore the lack of required skills remains a concern along with the ongoing uncertainty caused by Brexit.”

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