UK construction continues to drag on growth

Despite a bounceback in March, the UK's construction sector shrank in the first three months of the year, continuing to act as a drag on economic growth.

After falling for two consecutive months, industry output increased 3.9 per cent in March, the Office for National Statistics said, the biggest month-on-month rise for more than a year.

But overall, the industry contracted 1.1 per cent in the first quarter of the year compared with the last one of 2014. Against the first quarter last year, output was 0.3 per cent lower, suggesting the industry was flat lining.

Gareth Hird, commercial director of McBains Cooper, a construction consultancy, said that while the March improvement was encouraging "it would be premature to call this a recovery just yet".

Michael Conroy Harris, a construction lawyer at Eversheds, said that while construction has moved on from the depths of the recession "it's still a fragile plant needing care and attention".

Although survey evidence has consistently painted a more positive picture of the construction industry than official data, the most recent Markit/CIPS survey of construction purchasing managers' reported a sharp loss of momentum, which some put down to pre-election jitters.

Howard Archer, UK economist at IHS Global Insight, said it was clear that construction was not expanding at the same rate it was last year, but added that the sector was hoping "a reduction in political uncertainty following the election of a majority Conservative government will lead to increased client willingness to committing to major projects".

March's rebound was driven by a 12.2 per cent rise in repair and maintenance work, which offset a fall of 1 per cent in new work.

Despite political consensus that the UK needs to prioritise housing, private sector house building was down by 3.4 per cent on the previous quarter, though the monthly figure did show a 2.3 per cent rise, the first since September.

Data from the industry are generally erratic and last December the UK Statistics Authority said ONS construction output figures would no longer be considered national statistics because of concerns about the methods used to adjust for inflation.

Last week, the ONS said that in June it would introduce a methodology that it would retrospectively apply to figures from January 2014. But it added that its initial analysis found any revisions would be small.

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