False Alarms In The Construction Industry?

False Alarms In The Construction Industry?

16th July 2014

Despite our good news in one of last week’s blog posts, it looks as if pundits jumped the mark a little when predicting that the UK building industry is back on track following some lean years during the global economic downturn.  Recent reports disclosed that the British construction sector was enjoying an unprecedented upswing with many UK building companies hiring staff faster than they have in nearly twenty years.  This was accredited to a surge in commercial development and house building that led to a sharp rise in employment figures in the construction industry.

However, more recent reports reveal that construction output fell recently in both new work and repair and maintenance.  This is despite strong growth in the sales of construction products in the second quarter of this year which led to businesses showing increasing signs of optimism and product manufacturers reporting increasing levels of capital investment across all areas of business.  The largest contribution to the fall came from private commercial work and public new work.  Despite an increase in private industrial work and new work public housing, the relatively small size of these types of work have done little to offset falls elsewhere.

So, how do we know what’s actually happening in the construction industry – we seem to be getting quite a lot of conflicting news reports and things are pretty confusing.  Well, the official figures from the Office for National Statistics (ONS) demonstrate that construction output in Britain fell by 1.1% in May compared with April when the figures showed a rise of 1.2%.  This doesn’t really leave us any the wiser, especially with points of a percentage involved – these rises and falls are quite miniscule!  The ONS defines output as “the amount charged by construction companies to customers for value of work produced during the reporting period”.  

Although we’ve demonstrated just how small these falls and rises are, Reuters described the recent reduction in figures as a “steep fall” in British construction output!  With construction only accounting for 6% of UK economic output it is still considered an important driver of economic growth due to government incentives, low interest rates and a sharp rise in property prices boosting the home building industry.  Interestingly, mortgage approvals in May fell to their lowest level in 11 months but this is probably due to lenders insisting on tighter affordability checks.  

However, there still seems to be a shortage of skilled workers in the UK construction industry, as we reported last week in our blog post.  This means that school leavers or those who are considering a career change would do well to look at some sort of training in skills that would be necessary to enter into employment in that sector.  With new homes accounting for more than a third of new construction work here in the UK, learning an appropriate trade for the construction or refurbishment industry is still a pretty safe bet.