Construction hots up over summer

Published:  27 October, 2013

The construction industry saw further growth in the third quarter of 2013 despite a marginal decline in output during August, according to the latest Construction Review by Barbour ABI.

The construction industry saw further growth in the third quarter of 2013 despite a marginal decline in output during August, according to the latest Construction Review by Barbour ABI.

The residential sector led the increase in output, accounting for more than half of contracts awarded in Q3. Now valued at almost £6.9 billion, the number of new housebuilding projects climbed by 8% from the previous quarter, driven at least in part by the government’s Help to Buy initiative. This is expected to rise further in the coming months.

The Construction Review also revealed a 174% increase in civils sector contracts during Q3, with civils projects now worth £3.1 billion. This surge has been attributed to the commissioning of a number of large-scale road, rail and bridge projects over the last 12 months.

Despite the generally positive news for the construction industry, the medical and education sectors still face challenges, where the value of new projects declined by 1% and 29% respectively, due to the government’s on-going austerity measures and the reliance on state funding for new contracts.

Michael Dall, lead economist at Barbour ABI said: "It is unsurprising that residential construction projects were responsible for the lion's share of the growth, but what is interesting is the nationwide surge in the number of civils projects. This is traditionally a highly volatile sector, so it remains to be seen whether its recent performance will be replicated in Q4.

"While there is much to celebrate, the construction industry still faces difficulties. Sectors such as medical and education are still in decline, and much of the growth in the highest performing sectors is the result of government stimulus driving market demand. The issue is what happens when this stimulus ends but that's where the major investment outlined in the National Infrastructure statement comes in – getting these projects started is vital to sustained growth in the future.

"Overall, life is starting to return to the construction industry, and we can expect a much sunnier outlook for 2014, supported by sustained house building levels and improvement in general economic conditions."

Barbour ABI's findings were also supported by the latest GDP figures, published by the Office of National Statistics. These highlight that the UK economy grew by 0.8% in the third quarter of 2013 and construction grew 2.5% over the same period.

Noble Francis, economics director at the Construction Products Association, said: "The GDP figures released today show that construction was a key contributor to UK economic growth in Q3 for a second consecutive quarter. This adds to increasing optimism that the industry is recovering from its worst recession in 35 years. The construction sector rose 2.5% in Q3 primarily due to private house building, boosted by Help to Buy, and infrastructure, driven by work on Crossrail, which is Europe’s largest construction project. Although output in the sector still remains 12.5% lower than it was five years ago, today's GDP figures point towards recovery for the construction sector and the wider economy."

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