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UK construction output on the up

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World Cement,

The Office of National Statistics (ONS) has released its latest estimates of output in the UK construction industry for January 2014. The estimates are produced and published at current prices (including inflationary price effects) and at chained volume estimates (with inflationary effects removed) both seasonally adjusted and non-seasonally adjusted.

January 2014 highlights

Construction output in January 2014 rose by 1.8% (£170 million), driven by both repair and maintenance and new work when compared with December 2013. There was a slight rise of 0.8% (£50 million) in new work and a larger increase of 3.5% (£120 million) in repair and maintenance. However, while the volume of construction output continued to grow in January, the pace of that growth slowed by 0.2 percentage points compared with December 2013, reflecting lower output in the new private industrial (-4.5% m/m) and infrastructure sectors (-2.3%) in January, as well as slower growth in private new housing construction.

Long-term comparisons show an improved picture of construction output. All work in January 2014 increased by 5.4% y/y (£490 million) when compared with January 2013. New work has increased by 5.9% (£330 million) and repair and maintenance by 4.5% (£160 million) over the same period.

Construction growth and new orders in 4Q13

The second estimate of GDP for 4Q13, published on 28 February 2014, included an estimate of construction growth of 0.2%. This has been revised down to a fall of 0.2% due to a refinement to the seasonal pattern in the monthly series.

New orders for construction in 4Q13 are estimated to be 1.5% higher than 3Q13 due to a 5.2% (£200 million) increase in orders for new housing. All other work fell 0.4% over the same period caused by a 22.2% (£590 million) decrease in orders for infrastructure.

“The recovery is real, but dotted with caveats”

Paul Connolly, Managing Director of Cost Management at the Global Construction Consultancy, Turner & Townsend, commented on the estimates: "The recovery is real, but dotted with caveats. Such mixed data neatly illustrate both the strengths and the weaknesses of the construction industry's progress. The headline figures are impressive – with growth of 1.8% in January alone, total output is now half a billion pounds higher than it was at the same time last year.

“But much of this growth is heavily focused on housebuilding. Outside the buoyant residential sector – which is up by a truly remarkable 35% in a year – things are much less encouraging. Infrastructure output sank by 2.3% in January and is 3.2% down on the same time last year. The regional picture remains patchy too. The North/South divide continues and outside London much of the growth is concentrated on the university and learning hubs, where lack of supply risks driving up input prices.

“Inward investment remains strong as foreign players continue to see the UK as an attractive market in which to place their money and Britain's construction industry is steadily rolling out its latent capacity to meet growing demand. But while the boom in housebuilding says much about consumer confidence, the continued stagnation in infrastructure is a worry. The £100 billion promised in last year's Spending Review will not begin to flow into UK infrastructure for another year.

"Construction has always been a barometer of economic sentiment, but at its best it can also drive truly broad-based economic growth. It's great that the industry is responding to the surging demand for homes; but until the funding environment for infrastructure projects improves, construction will struggle to fulfil its full potential as an engine of growth for the wider economy."

Read the full statistical bulletin for Output in the Construction Industry in January 2014 here.

Adapted from press release by Rosalie Starling

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