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UK construction output rise of 2.5%

Britain’s construction output bounced back in Q2 2016 and along with strong industrial production data painted a brighter picture of the economy than expected.

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The Office for National Statistics said construction output rose 2.5% in Q2 from the previous quarter. This was the biggest monthly increase since January 2014 and surprised economists, who had expected 1.7% growth. However, the rise was not big enough to make up for a Q1 3.6% decline.

The ONS said some of the rise may be linked to the seasonal adjustment effects around the timing of the Easter holidays this year.

Business surveys have pointed to a slowdown in the   UK economy in the run-up to the 23 June referendum on EU membership, particularly in the construction sector. A leave vote would hit the industry hard, as it relies heavily on migrant labour. The official data suggests the economic picture may be brighter, with industrial production growing at the fastest pace in almost four years in April.

But output in the sector, which makes up 6% of the economy, fell 2.1% between February and April from the previous three months – the biggest contraction in just over three years. And new construction orders dropped 1.2% between January and March, the sharpest fall since spring 2014, according to the ONS.

The breakdown of the figures showed that even though house building in the private sector rose 5.8% from a year earlier, overall house building was only marginally positive because of a near 21% slump in new public housing.

Chris Williamson, chief economist at the survey compiling firm Markit, said: “Dig deeper and there’s good reason to treat the better news with caution. The underlying trend in fact appears to be one of weakening output, albeit to some extent due to what will hopefully be temporary uncertainty surrounding the EU referendum.”

Britain’s economic growth slowed to 0.4% in the first quarter from 0.6% in the previous quarter, and closely-watched surveys from Markit suggested growth eased further to just 0.2% in the second quarter of this year.

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