Construction industry shrinks for second consecutive month


ONSConstruction output has fallen for a second consecutive month according to the latest figures from the Office of National Statistics (ONS), which also recorded the first year-on-year fall since May 2013.

The latest ONS bulletin for August 2015 shows output fell by 4.3% compared to July, and was down 1.3% on the month the previous year. The data also shows that this was not an isolated figure for the month, with the three months to August performing 0.8% less than the previous March to May period.

The fall in output from July to August – the biggest since December 2012 – was due to the 3.6% fall in all new work, with repair and maintenance decreasing the most (5.6%).

Despite driving the construction sector for many months, the house-building sector suffered a 3% reduction from July, which itself was down 2% on the previous month’s output. Both private and public new housing output fell by 1.6% and 9.9% respectively over the same period, with claims emerging that recent Government measures have potentially damaged developers’ ability to build.

On an annual basis, new housing output fell by 5.8% in comparison with August 2014, with public housing providing all of the fall (down 28.9% compared to the 0.2% increase in private housing).

The bulletin also shows that new orders for housing were down, with Q2 (April to June) having fallen by 2.3% compared to the first three months of the year. The ONS estimates that housing new orders will take approximately
 three to six months before they become part of construction output, meaning the fall in new housing orders supports a fall in new housing work.

The ONS has suggested the weak figures for construction in August may have been linked to wet weather during the month. However, recent reports on the state of the UK job market have suggested skills shortages are very much playing a part in slowing output in the construction sector.

The most recent Report on Jobs from the Recruitment and Employment Confederation (REC) and KPMG found that construction remained in the top three industries experiencing an expansion of demand for permanent staff. It is believed this continued shortage of staff will negatively impact the industry’s ability to build.

Kevin Green, chief executive of REC, said: “Talent shortages are making it increasingly difficult for employers to find quality candidates. This is now at a critical stage in the construction and engineering sectors, constituting a major threat to planned rail upgrades and house-building projects.

Owen Goodhead, managing director of specialist construction recruiter Randstad, added: “Britain is facing a skills shortage – putting our homes, infrastructure and economy on the line. Construction in the UK could be expanding instead of retreating if the right people were in the right jobs. But training, skills and flexibility need to accelerate hugely for construction jobs to keep up with demand.

“The construction industry needs the Government’s time and energy. Without it, all the Chancellor’s talk of investment in infrastructure will come to nothing. We are seeing the very real effects on the industry of the five year skills gap which will only increase unless we start attracting new people now.”

Despite these disappointing figures for the construction industry in August, a recent industry survey found that that house-building actually pushed the sector to a seven-month high in September.

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