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Construction downturn a ‘reality check’

Hinkley Point C pre construction

The latest Office for National Statistics (ONS) figures show that construction output decreased in August by 1.5% compared to the month before, with infrastructure suffering the most.

Post-Brexit, the figures for August show that the two categories of “new work” and “repair and maintenance” both reported decreases compared to July, falling by 1.4% and 1.5% respectively. The largest downwards contribution in all new work came from infrastructure.

However, there is a slightly more positive longer-term outlook as suggested by year-on-year movement, showing output in the construction industry increased by 0.2% compared with August 2015.

“Such an abrupt reversal in construction sector output serves as a useful reality check for anyone tempted into complacency by the construction sector’s initial resilience,” said Turner & Townsend UK managing director Jon White.

“The industry may have absorbed the initial shock of the referendum result with barely a ripple, but the benign limbo could not last forever.

“However, sentiment in the sector remains strong. The latest PMI survey showed confidence had vaulted into positive territory, and on the front line we’re seeing a steady stream of new orders in both the property and infrastructure sectors.

“Public sector spending on construction projects is creeping up, and the industry has been buoyed by the prime minister’s green light for the Hinkley Point C nuclear power station.

“The government’s renewed commitment to infrastructure projects is encouraging – both for the construction industry and the economy as a whole. Such long-term, strategic programmes are the least likely to be blown off course by Brexit concerns.”

However, White said that post-referendum uncertainty is taking a toll, with the weak pound increasing the cost of imported materials. This, coupled with a longer-term skills shortage, risks price inflation.

“It’s evident that the Brexit effect is still having a degree of impact as some projects and investments are likely to still be on hold because of the uncertainty surrounding Brexit and the eventual shape that this will take,” said RSK Group head of Manchester office Rob Domeney.

“What the industry is really looking for is a sign of the government’s clear commitment to the Northern Powerhouse, on which there have been mixed messages recently. A commitment to projects like HS2 and HS3 would spark renewed investment in the region, having a real impact on the construction sector and the wider economy.”


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