ONS figures mark a step in the right direction but more still needs to be done

The figures, provided by Barbour ABI, show an increase of 0.2% for output in the construction industry in October compared to September, and a total output of 1.0% compared to 2014.

On a quarterly basis, new orders in Q3 2015 (totaling £16.1 billion) increased by 0.8% compared with Q2 2015, but showed no growth compared with Q3 2014.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said: “The third quarter in construction saw an increase in new order values despite the wider slowdown in growth across the UK economy. In particular, the infrastructure sector experienced strong gains in the third quarter, with major projects such as the Thames Tideway Tunnel reaching the contract stage.

“In addition, the latest ONS output figures for October which shows growth of 0.2% compared with September, suggests a potentially stronger finish to the end of the year after the summer slowdown.

“Overall, the levels of appetite for investment across construction remain strong at the contract stage. However, the problems lie more on the supply side at present, with skills shortages in particular a major challenge in moving projects from the conceptual to the delivery phase.”

The ONS also reports the already visible positive impact of recent Government house-building commitments as private new housing has shown an increase of 2.3% on the previous month, however the concerns remain with public new housing as this reported a decrease of 2.8%.

Dr Noble Francis, economics director of the Construction Products Association, commented: “Going forward, policies announced by the Chancellor in his recent Autumn Statement, such as London Help to Buy, should ensure further growth in private housing output by incentivising major house-builders to increase building rates over the next 12 months. However, there are mounting concerns regarding affordability in the housing market, especially in London where average house prices are already 9.6 times average earnings.

“The falls in public housing are a major concern, despite the Chancellor’s announcement of ‘400,000 new affordable homes’ in November’s Autumn Statement. Public housing output in October was 3.0% lower than September and 25.9% lower than a year ago. The ONS figures also highlight that new orders for public housing in Q3 were 26.7% lower than a year ago due to funding issues for housing associations as they face falling public sector funding, cuts in social rent and the extension of Right to Buy. As a result, the trend for public house-building appears to be sharply negative over the next 12 months.”

Andrew Bridges, managing director of Stirling Ackroyd commented: “Demand for homes is fierce and growing. But with supply still set to be the scrooge of the festive season – it’s left to the New Year to provide a resolution to London’s housing woes. Something’s got to give – and it’s up to future Mayoral candidates to prove their construction credentials.”

To view the full figures from the Office of National Statistics click here.