Construction activity falls as fears grow about reliance on house-building

House-building failed to sustain the growth in construction activity in April

House-building failed to sustain the growth in construction activity in April according to recent figures, despite it still accounting for a third of the total value of new contracts awarded.

A report reveals that the total value of all new construction contracts awarded in April fell by 1.8 per cent compared to the month before, with the number of projects also 6.6 per cent lower than March.

These figures are taken from Barbour ABI’s latest Economic & Construction Market Review, which also shows that residential construction had the highest proportion of contracts awarded by value in April, with 33% of the UK total. Only two of the past 13 months have seen residential construction take a slice less than 30%, fuelling fears that the construction industry is in danger of becoming too reliant on the housing sector.

The report goes on to highlight London’s continued hold on the market, with the capital accounting for 16% of the total value of new contracts awarded. Four of the top 10 most valuable contracts were located in the city, including phase one of the Leamouth Peninsula residential development worth £200 million, the £95 million Creechurch Place office development (formerly One Mitre Square) and the ‘Quantum Leap’ redevelopment programme of the London Clinic worth £58 million. Scotland came out on top overall, accounting for 21 per cent of all contracts by value, but this is mainly due to the Neart na Gaoithe offshore wind farm project off the Fife coast, worth £675 million.

On the findings of the report, Michael Dall, lead economist at Barbour ABI, commented: “With economic output only 0.6 per cent below its pre-crisis peak in Q1 2008, there is no question that the economy is experiencing a growth phase. Construction, too, has continued to grow over recent months, and the recent ONS output figures show the first quarter of this year was at 5.4 per cent higher than the equivalent period in 2013.

“While the continued recovery is noticeable and welcome, analysing individual sectors within the industry provides a note of caution. Private housing continues to drive resurgence in the construction industry, boosted by government initiatives such as Help to Buy. However, there are concerns that too much of this growth is concentrated within the

housing sector, and an upturn in other key sectors – particularly private commercial and infrastructure – is vital for a stronger and more durable recovery.

“In addition, there have been reports recently of skills shortages affecting the construction industry. Addressing these supply-side constraints is crucial to ensure the long-term health of the industry going forward.”

The Economic & Construction Market Review is a monthly report designed to give valuable, current insight into UK construction industry performance. It is compiled from Barbour ABI’s records of construction data for every UK planning application and key indicators such as the Office for National Statistics’ Construction New Orders data.

www.barbour-abi.com

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