Economic digest: An overview of the UK construction industry and economy

Clay Technology magazine
21 Feb 2019

An overview of the UK economy and construction industry.

Office of National Statistics figures released in January 2019 show a rise in private new housing construction towards the end of 2018. With construction output for Great Britain recorded at an all-time high in November 2018 in the chained volume measure seasonally adjusted series – the month-on-month series grew by 0.6%, resulting in the total value of construction output exceeding £14bln for the first time since monthly records began in 2010.

For Northern Ireland (NI), the total volume of construction output in the third quarter of 2018 increased by 5.5% compared with Q2 2018, and was 2.0% higher compared to the same quarter in 2017. Despite fluctuations, the total volume of construction output in NI has been on an upward trend since Q4 2013.

A House of Commons briefing paper released at the end of 2018 notes that there were 2.4 million jobs in the construction industry in Q3 2018, representing 6.8% of all jobs in the UK. In the last 10 years, the number of jobs in the construction industry has been broadly steady, despite falling in 2009 and 2010. However, the number of construction jobs as a proportion of all employment has fallen. This is in the context
of rising output, meaning that the construction sector has become more productive.

In Q3 2018, construction output was 14% higher than in Q1 2008 – output in the whole economy has grown by 15% over the same period.

In January 2019, Barbour ABI reported that the construction sector saw the largest growth in Q3 2018 at 2.3% followed by both manufacturing and services at 0.4%.

However, all is not rosy as, at 52.8 in December 2018, down from 53.4 in November, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted above the crucial 50.0 no-change value for the ninth consecutive month signalling only a modest rate of expansion and the slowest seen since September 2018.

Total new business volumes (December 2018) picked up for the seventh successive month, but the rate of expansion eased from November. A number of construction companies noted that heightened political uncertainty had encouraged delays to spending decisions among clients, especially in relation to commercial development projects.

Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey noted, ‘Subdued domestic economic conditions and an intense headwind from political uncertainty resulted in the weakest upturn in commercial work for seven months.’

This concern is echoed by The Office for Budget Responsibility, which now predicts the GDP growth will be 1.6% in 2019 up from 1.3% indicated in March mainly due to the provisions of the 2018 Budget. Growth rate will then slow to 1.4% in 2020-2021.

At the start of 2019, the prospects for the UK economy remain uncertain with the political turmoil surrounding Brexit continuing.