UK construction output slumped in the last three months, as the government reduced its spending on house-building, infrastructure and other building projects.
Data from the Office for National Statistics showed a 0.9% drop in construction in August from the previous month, which led to a 12% drop in the third quarter compared with the same period last year.
Economists said construction is likely to drag on GDP in the third quarter. Chris Williamson of Markit said official figures will probably show the economy grew by 0.6% in the third quarter, but says that flatters performance because of the rebound from lost working days in second quarter. He forecasts that the economy actually grew by just 0.1%. “We’re scraping through, the economy overall has been stagnant for the past year.”
Sector output drops 12% in the third quarter as government cuts cause steep declines in public spending on building work
Government cuts caused steep declines in public spending on building work. New public housing work and other building projects fell by more than 20%, while infrastructure spending was down 18% from the third quarter last year. The private sector was not much better, with new housing and commercial work down 12% and 14% respectively on last year. The only sector where input increased over the period was new private industrial work, which rose by 1.8%.
Williamson said: “The construction industry looks likely to have acted as a drag of GDP in the third quarter, though perhaps less so than in the first half of the year. The ongoing downturn is being led by falling public sector spend and the housing sector, though an increase in private industrial work provided a welcome bright spot, which suggests that there is at least some upward momentum resulting from increased construction spending by companies.”