Construction companies sharply curtailed their activity on repair and maintenance work in August in one of the few concrete signs of falling output after the EU referendum.
Official figures on Friday showed output in the construction industry down 1.5 per cent in August compared with July, with the decline unlikely to be just a monthly blip because production in the latest three months between June and August was also lower, by 1.3 per cent compared with the previous quarter.
But the figures reveal little about the overall effect of Brexit on the economy over the summer because construction accounts for only 6 per cent of the UK economy. The official construction figures have also been stripped of the “national statistics” quality status by the UK statistics authority after concerns about their reliability.
Chris Williamson of IHS Markit said the weak figures “put the sector on course for its worst quarter for four years and at risk of heading back into recession”, but held out the hope of a better September given a rebound in surveys of the sector that month.
New construction work was down marginally in August but has been broadly flat for the year, while there has been a marked decline in recorded repairs and maintenance.
The largest drop in output came in the repair and maintenance of public housing, following the continued squeeze on the budgets of local authorities and housing associations with such activity 14.5 per cent lower in August than a year earlier. Infrastructure also showed a sharp decline in August, although that reversed an equally large increase in July.
Almost all of the components of new work — housing, infrastructure and other work — have been flat for most of the past year, although there has been a sharp decline in the construction of new public housing. The one exception is private industrial construction, where output was down 13.1 per cent in August compared with a year earlier.
With a weight in national income of only 6 per cent, a similar decline over the third quarter would represent a drag of 0.08 percentage points on the economy-wide growth rate, significant but unlikely to dominate the growth figures due out on October 27.
Samuel Tombs of Pantheon Macroeconomics said the construction weakness would be unlikely to derail the official figures for the whole economy. “A robust increase in services output, however, still looks set to ensure that GDP grows by about 0.5 per cent, greatly exceeding the MPC’s original expectation of zero growth,” he said.
The Office for National Statistics warned against strong conclusions from the data given that the infrastructure component was volatile. “Monthly construction data can be quite erratic, though, so we would warn against trying to read too much into one set of figures,” it said in a statement.
