Monday 11 February 2019 12:10 pm | Updated: Monday 03 June 2019 1:22 am

Construction output drops sharply in December against ‘grim’ industry backdrop

Construction output has dropped sharply in December in an industry “stripped of confidence and momentum”.

According to the latest Office for National Statistics (ONS) figures, output fell 2.8 per cent month-on-month in December, driving a longer-term stagnation of 0.3 per cent in the final quarter.

The housebuilding sector, previously one of the industry’s strongest, experienced new work plummeting 6.8 per cent month-on-month.

Blane Perrotton, managing director of surveyor Naismiths, said: “Few sectors have seen the economic brakes slammed on as hard as construction.

“Builders’ booming third quarter – in which output rocketed by 2.1% – feels a lifetime away.

“Labour shortages and rising material costs are eating into margins, and intense competition for the little work that is being put out to tender is forcing contractors to bid painfully low.”

“While the final quarter of 2018 can be filed under ‘slowdown’ rather than ‘slide’ – just – such distinctions are moot in an industry which has been stripped of confidence and momentum.

“Against this grim backdrop, confidence is ebbing away."

Compared with 2017, the level of all work in 2018 saw a 0.7 per cent increase, the lowest annual growth since 2012 when annual output decreased 6.9 per cent.

Overall new work increased 1.1 per cent, driven by increases of 1.9 per cent in infrastructure and 1.4 in private commercial new work.

Clive Docwra, managing director of consultant McBains, said: “Today’s figures show a mixed picture – unsurprising given concerns about the UK economy and whether it can withstand a no-deal Brexit.

"These fears, coupled with longer running issues such as high import costs and skilled worker deficits, are now cutting through and impacting key investment decisions.”

Jonathan White, UK head of infrastructure at KPMG, said: “The healthy pipeline of work that was fuelling construction towards the end of last year has dropped off somewhat and is showing a slow-down in momentum. We’re detecting nervousness in the sector, and are worried companies may be tempted to bid at unsustainable rates in an effort to win work.

“While overall growth in construction and manufacturing is showing a decline, there are still some investors looking to the UK as an opportunity. The £1bn investment in Gatwick airport is a recent transaction that reminds us of the UK’s appeal and reputation as a global transport hub. That said, the “wait-and-see” approach does seem to be more prevalent in light of the prolonged resolution to Brexit and this is likely to be the case over the coming months.”