Construction output in Q4 of 2017 was 1% above that of a year ago, with growth driven by new housing – and private housing proving particularly strong
The latest ONS figures showed UK GDP grew by 0.4% quarter-on-quarter in Q4 of 2017, revised downward by 0.1 percentage points from the preliminary estimate, in part reflecting a downward revision to the estimated output of the production industries. We expect GDP growth to moderate slightly this year to about 1.5%.
The construction forecasts outlined here are taken from our latest winter publication and thus do not yet reflect our macroeconomic downgrade.
Between October and December 2017 total construction output rose by 1% to £38.76bn (in 2015 prices) compared with the same period in 2016. The public housing market contributed to the overall rise with year-on-year growth of 4% to £1.38bn. The sector is expected to grow by an annual average of 6% over the next three years, with the Spring Statement 2018 reaffirming the government’s commitment to its investment programme of £44bn over the next five years. The sizeable drop in new orders in Q4 of 2017, following on from two similarly strong quarters, presents a downside risk to the short-term output forecast for the sector, however.
In new work, private housing posted the strongest year-on-year growth, rising 9% to £8.41bn, making it the largest new work sector for the ninth consecutive quarter. It is expected to continue growing over the forecast period, albeit at a slower annual rate of 3%. Growth in new orders has slackened in recent quarters, with a slight increase in orders in Q3 of 2017 being followed up by a Q4 decrease of equal magnitude. Economic uncertainty is likely to curb investor appetite while affordability issues dampen buyer demand. Nonetheless, private housing activity, at least in output terms, remains at a historically high level. House price growth is expected to average 2.8% per year between 2018 and 2020.
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