Official figures suggest construction activity is in decline

Output in the construction industry fell in the first three months of 2015 despite strong performance in March, according to new figures from the Office of National Statistics (ONS).

The data shows activity is estimated to have dropped by 1.1% compared to the final quarter of 2014, and 0.3% since Q1, marking the first year-on-year fall since Q2 of 2013.

The ONS says downward pressure on the quarter came from all new work, which fell by 1.7%. This was the largest quarter-on-quarter fall since Q1 2013, when it fell by 2.0%. However, the majority of this fall came in January and February, with output rising by an estimated 3.9% in March compared to the previous month. This growth also reflected annual figures, with March up 1.6% on the same month in 2014.

March’s increase on the previous two months was fuelled by the repair and maintenance sector, which is estimated by the ONS to have grown by 12.2%. Despite driving activity in the sector since early 2013, house-building fell by 3.4% across the quarter which marks the second consecutive period of reduction. However, new work for private housing grew by 2.3% in March, meaning that the level of total housing at œ6.6 billion remained 5.0% higher than the first three months of 2014.

Despite these official findings, there is evidence to suggest that companies within the construction industry are not feeling the falling output. According to the latest Construction Trade Survey from the Construction Products Association (CPA), firms have reported continued growth throughout the beginning of 2015, calling Q1 the eighth quarter of growth in a row. Large contractors, SMEs, specialist contractors, civil engineers and product manufacturers all reported a rise in workloads, output or sales in Q1. According to the CPA’s findings, private housing output actually rose in Q1 according to 54% of building contractors, on balance

Dr. Noble Francis, economics director at the CPA, said: “Activity rose in the first quarter of 2015 compared to a year earlier according to 50% of contractors, on balance.”

This suggests that the ONS figures may be adjusted at a later date, as due to the strong performance of March, the final figure of 1.1% has already been revised up from the ONS’ preliminary estimation of a 1.6% reduction.

The CPA also claims that the growth that it has recorded will continue throughout the rest of 2015, although a high percentage of respondents to its survey (81%) experienced cost increase in Q1, while 63% reported an increase in labour costs. This suggests that while workloads are likely to increase in 2015, cost pressures are also likely to build.