The latest construction output figures show that the industry remains in a relatively healthy position

Michael Dall

It continues to grow in 2014 compared with last year, with total construction output in July 2.6% higher than the corresponding month in 2013. However, the latest figures show that the industry did not grow between June and July, with a 1% rise in new work unable to offset a 1.5% decline in repair and maintenance.

The industry is still mainly driven by the increases in private housing work, though even this rate of growth has slowed somewhat in recent months. It was always likely that the rapid pace of growth in new housing would abate at some point as housebuilder capacity adjusted to the sharp rise in demand. Still, the level of output in private new housing is 15.9% higher in July 2014 compared to July 2013.

The biggest constraint on growth in the industry remains the relatively weak performance in the commercial sector, which still lags behind housing growth. Commercial is traditionally the largest sector within the industry so growth is needed to ensure the industry returns to pre-recession levels of activity sooner. The latest output figures show that commercial output in August was 4.6% below the levels recorded the previous month. This demonstrates the uplift required in the coming months and years to boost growth in the industry as a whole.

What is behind the fall in commercial output? Outside of London the number of large commercial schemes is relatively small. There have been a number of significant London schemes announced over the last months that demonstrate the appetite to invest exists.

The picture outside the M25 is less rosy. It should be noted however that in the last month major schemes such as the Branston commercial development in Staffordshire, to include offices and industrial space and valued at £107m, indicates that perhaps this will improve. More developments of this kind can only be good news for construction across the UK.

Michael Dall is an economist at Barbour ABI

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