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UK Construction Output Suffers Biggest Drop Since 2012

Figures released by the Office for National Statistics (ONS) indicate that construction output in the UK has experienced its biggest decline since August 2012, reinforcing concerns that economic growth in the first quarter has been sluggish.

The ONS figures show that construction output has declined by 2.7% in the three months to March. This result signified the biggest reduction on a three-month basis since 2012 and was driven by lower levels of repair and maintenance as well as new construction.

Viewed on a month-to-month basis, construction output went down 2.3% in March.

According to the ONS, some survey respondents were affected by snowy weather in February and March, although the exact impact on the industry was difficult to quantify.

The economy

Figures also suggested that in March manufacturing fell by 0.1% compared to February. Total production in the UK, however, rose by the same amount month-on-month due to greater energy demand during the snowy weather.

The  Index of Production increased by 0.6% compared to the three months to December of last year, primarily due to a 2.5% increase in energy supply over the same period.

Rob Kent-Smith, head of national accounts at ONS, said that the figures confirmed earlier estimates indicating that the economy was slow during the first quarter of 2018. He stated that during the first quarter, manufacturing was flat overall after several months of growth. Both domestic and international sales slowed down although there was no evidence that severe weather affected UK factory production.

Structural Defects Insurance

The ONS also issued trading data for the three months to March.

The total trade deficit in the UK came in at £6.9 billion over the period, a reduction of £700 million. The ONS attributed the fall to fewer goods imports from countries outside the EU.

Suren Thiru, the British Chambers of Commerce head of economics, said that the narrowing deficit was good news, but short-term trade figures often experience significant revision and should therefore be treated with caution.

Export and Import activity

Mr. Thiru said that while UK export activity remains strong due to improved trade conditions worldwide, the country’s net trade position will continue to be affected by strong import growth, with little indication that consumers or businesses are turning from imports to domestic products despite a higher cost.

Consequently, lack of import substitution will probably limit the contribution of trade to Britain’s economic growth. This means that the UK economy will not experience a sustained re-balancing in the near future.

Howard Archer, chief economic adviser at EY ITEM Club, said that the outlook could remain difficult, with the economy’s weak first-quarter performance likely to arouse concerns along with the Brexit uncertainties that limit the willingness of clients to commit to new projects.

Mr. Archer added that a new infrastructure project shortage is also a concern. UK construction companies will hope that the measures taken in the November 2017 budget to increase new home construction output to 300,000 annual will prove to be effective.

Specialists in Construction Insurance


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