Construction growth remained positive in 2014 despite reduction in Q4

Growth in the construction industry remained predominantly positive throughout 2014 despite a reduction in output in the final quarter of the year, according to new data released by the Office of National Statistics (ONS).

Annual data for 2014 showed output in the construction industry was estimated to have increased by 7.4% compared to 2013. All work types recorded increases except infrastructure, public other new work and private commercial work, although recent forecasts have suggested that these will likely see greater activity in 2015. The largest increase was reported by total new housing, increasing by 23.0% in 2014 compared with 2013.

Between Q4 2014 and Q4 2013, output was estimated to have increased by 4.8%, which marks the sixth consecutive period of annual quarter-on-quarter growth. However, this final quarter of 2014 experienced a reduction in construction sector output of 2.1% compared to the previous three-month period.

Following falls in October and November 2014, output in the construction industry was estimated to have increased by only 0.4% in December 2014 compared with November 2014. ONS data also showed that the driving force behind construction performance may be waning as housing work also fell in the final quarter. The ONS suggests that this may be indicative of a slowing of new orders for new housing in 2014, having largely recovered from the crash of 2007-8 – the level of total housing at œ6.9bn remained close to the peak of œ7bn reported in Q1 2007.

On the year, the picture remained one of annual growth, with output between December 2014 and the final month of 2013 remaining positive at 5.5%. This was the nineteenth consecutive period of year-on-year monthly growth.

This performance has resulted in renewed confidence for the construction industry. Chris Temple, engineering and construction leader at PwC, said: “While Q4 2014 output decreased compared with the previous quarter, the construction sector continues to show healthy year-on-year growth and our clients are optimistic about the year ahead, with most expecting growth in 2015 in excess of 3%.”

Despite this positivity, the industry faces further issues from rising costs and limited numbers of skilled workers, both of which could potentially stifle any further growth in 2015.

Mr. Temple added: “There is still an overhang from the recession of companies bidding low rates for work. We expect this to continue in the short term but pressure from the rising costs of labour and materials mean that this is not sustainable in the medium to long term.

“The outlook for jobs in the construction sector remains bright for candidates. There continues to be a skills shortage and, therefore, skilled and semi-skilled labour will continue to be in high demand, putting upward pressure on firms’ wage bills.”

To read the ONS’ full report for output in the construction industry in both December and Q4 2014, click here

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