Construction Output on the Decrease in Britain

Construction Output on the Decrease in Britain

13th October 2015

The last week has turned up some quite disturbing news for the construction industry as a whole.  According to the Office of National Statistics, the UK construction industry saw output decrease by 4.3% in August 2015 compared to July 2015.  This is the first year-on-year fall since May 2013.  There was a decrease in all work types but the main contribution to the fall came from Repair and Maintenance activities where all work types reported decreases.  This slowdown (combined with a dent in exports caused by the Chinese slump) has led to an overall slowdown in the UK’s economic growth which is worrying for Britain as a whole.  Sterling has weakened in the global economy dropping 8% against the Euro.  The construction sector makes up 6% of the UK economy and, according to Howard Archer (chief economist at HIS Global Insight) it’s now “highly likely that construction output contracted appreciably in the third quarter and was a drag on GDP”.

Construction companies here in the UK claim that a skills shortage is likely to delay some major building projects which is bad news for the industry as a whole.  Some analysts are blaming the August downturn on wet weather but it’s hard to ignore that the steep fall followed a weakening trend in recent months that led to the construction industry experiencing its first annual reduction in output since the summer of 2013.  When the latest statistics are examined more closely, it shows that all construction types reported a fall for the first time since December, 2010 and that housebuilding was down 3% month on month.

These statistics appear in the wake of a series of speeches by senior politicians calling for a revitalisation in spending on infrastructure projects and housebuilding.  There are currently several projects are in the planning stage (including a second Crossrail tunnel in London, HS2, the Thames Water super sewer and railway upgrades to encourage the “northern powerhouse”).  At the Conservative party conference in Manchester George Osborne claimed that one of the key issues holding back infrastructure spending is “nimbyism”, asking “Where would Britain be if we had never built railways or runways, power stations or new homes?”  The controversial new leader of the Labour party, Jeremy Corbyn, has committed to increase infrastructure spending along with housebuilding with less reliance on private sector funding.

According to key figures in the construction industry itself, the main problem that’s inhibiting output at present is a severe skills shortage which is causing construction in the UK to decrease rather than expand.  The training, skills and flexibility necessary for construction to keep up with demand is a major issue – without it, politicians’ intentions to invest in infrastructure is likely to come to nothing.  Hopefully the government’s spending review that’s due in November will give the industry more confidence in the planned infrastructure and housing growth over the next five years.  Until then, the industry certainly looks to be in the doldrums – a situation that needs to change.