Housebuilding drives construction output up in second quarter

Output in the UK construction industry increased by 1.4 per cent in the second quarter of the year compared to the previous quarter and 0.5 per cent year-on-year.

This was driven primarily by housebuilding, which rose by 8.6 per cent quarter-on-quarter. New orders were at a 15-month high fuelled by residential building.

The Office for National Statistics said this had no effect on preliminary GDP estimates to one decimal place.

Looking at June alone, output slowed by 0.7 per cent compared to the previous month. However, this fall and the 0.2 per cent contraction the previous month followed an April in which output rose by five per cent.

Year-on-year, however, June's 1.9 per cent boost was the first increase in annual output since December 2011.

Howard Archer, chief UK and European economist at HIS Global Insight, said this was “more good news for the UK economy”, which seems increasingly to be “shrugging off its long-term problems and now contributing to growth”.

Of critical importance to the construction sector going forward is that the economy and the housing market sustain their recent improvement over the coming months, and that this increasingly stimulates building work. It currently appears that housing market activity is really stepping up a gear, while the government’s Help to Buy initiatives in the budget to boost housing market activity was also welcome news for housebuilders.

Nevertheless, the upside for construction activity continues to be constrained by limited public sector projects amid tightened government spending, while the past extended weakness of the economy means that private commercial activity may take some time to really pick up markedly. In addition, significant problems can still occur in getting funding for some large-scale projects. While the government has made much noise recently about new infrastructure projects, the fact is that this largely will not help the construction sector for some considerable time to come.