Construction 'riding high in April, shot down in May'

Construction output fell 2.1% in May, as gloom continued to gather around the construction industry.

The month-on-month fall came off the back of a 2.5% rise in April, prompting Michael Dall, economist at Barbour ABI, to comment: “Construction was riding high in April, shot down in May”.

Economic indicators for the construction sector have turned south in recent months, as uncertainty both in the run up to, and after the EU referendum, have gripped the industry, as well as the effects of a wider global economic slowdown.

The latest Markit/CIPS survey of construction buyers, published earlier this month, registered its lowest sentiment reading for seven years in June, with more purchasers expecting a downturn rather than expansion than at any time since 2009.

The latest figures from the ONS revealed that both new work and repair and maintenance reported decreases in May, falling by 2.6% and 1.4% respectively.

Within all new work, there were decreases in all work types, except infrastructure. The main contribution to the decrease came from private new housing.

Output in May was also down 1.9% year-on-year on May 2015.

Dall added: “The construction output figures released today are in line with other economic indicators which seem to suggest after a strong April, May saw a downturn in activity.  Analysing the positives private housing is still increasing over the longer term, despite falls this month. 

“However, the infrastructure sector is declining over the longer term with activity 10.3% lower than last year. Given the more positive rhetoric from the new Prime Minister on building infrastructure these latest figures should give her some food for thought.”

Mark Robinson, chief executive of contracting authority Scape, commented that it was encouraging infrastructure output increased: “May was the first month where we saw output in infrastructure increase month-on-month since December 2015, and it is really encouraging to see companies taking action with projects that will help boost our economy regardless of what is on the economic horizon.

“With a host of new appointments in Government now set to drive forward construction, and with Philip Hammond taking over from George Osborne as Chancellor, it is imperative they take a vested interest in these projects and do not put infrastructure plans on hold.”