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UK construction news: output in July 2014

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World Cement,

Last week, the Office for National Statistics (ONS) released its latest estimates of output in the construction industry in July 2014 and for new orders in 2Q14. UK firms Barbour ABI, West One Loans and Turner & Townsend have provided a commentary on the statistics:

Michael Dall, Lead Economist at Barbour ABI, said:

“It’s encouraging that new orders are continuing on a positive trajectory, but with the rate of growth slowing from recent quarters, today’s announcement still isn’t the silver bullet we need to dispel all concerns about the performance of the construction sector.

“What is particularly interesting in today’s figures is the growing strength of new orders in the private commercial sector and especially for office contracts where we’ve seen an increase by 29% in 2Q versus 1Q this year.

“Early indications from our monthly Economic and Construction Market Review, however, point to a summer slowdown on the commercial side. We would need to see consistent growth in this area before we can confidently say it is having a real impact on the industry.”

Duncan Kreeger, Director of West One Loans, commented:

“Britain needs more homes – and yet their supply is the one stream of our roaring economy that’s still trickling. Across the wider construction industry things are gradually going the right way, but today’s figures are a tale of floundering housing output in a sea of opportunity.

“Property needs a more radical turnaround. New orders for private new housing are falling at least twice as fast as economic output is going in the other direction, and that’s not sustainable. So smarter approaches are vital, to make more imaginative use of the buildings we already have. Property is valuable and there’s no need to leave empty old offices, shops or industrial buildings when they could be viable places to live. Unloved homes that can’t secure their owners a mortgage because they don’t have a bathroom, for example, are even sadder – and traditional lenders still haven’t got their heads around funding these projects.”

Steve McGuckin, Global Property Director of Turner & Townsend, said:

"Such tepid rates of growth confirm that no-one should expect miracles from the construction industry. Uncertainty over Scotland’s future path has inevitably held back growth north of the border, but across the UK order books and levels of confidence remain robust. Yet the momentum the industry has built up during the past year cannot be taken for granted.

“Private sector housing is still the most obvious success story, with strong residential demand now triggering building across most of the country. In some areas housebuilders have over two years' worth of orders on their books, and momentum enough to keep building.

“But other sectors are raising their game too, which is very encouraging. Infrastructure output has finally snapped out of reverse to rise by 3.3% in July, even though its year-on-year slump of over 9% means it still has a long way to go. Yet the industry cannot continue to rely on residential building as its primary engine of growth.

“The point is driven home by the new orders figures, which show that orders for private sector housing projects slipped by 6.3% in the second quarter. Fortunately other sectors are taking up the slack. New orders for infrastructure rose by a barnstorming 20.8% in the same period, and new orders for private commercial sector properties were up by 9.6%.

“The prospect of an interest rate rise and its likely chilling effect has receded, but the elephant in the room is Scotland. These figures show the state of the industry before the referendum forced its way onto the front pages, but the long lead times involved in construction mean many Scottish projects have been kept on hold ever since the referendum was announced. With concerns over Scotland’s future now at risk of spooking investors south of the border too, there is a danger that the confidence built up so painstakingly could be eroded.”

Adapted from press release by Rosalie Starling

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