Brexit latest: Construction output flatlines in July in wake of EU referendum

The Office for National Statistics said that there was zero output growth from the sector in July - although analysts had expected a contraction

Building output did not grow in July (Getty)

The output of Britain’s builders flatlined in July according to the first official data on construction covering the period in the immediate wake of the Brexit vote – but this was a more robust performance than expected.

The Office for National Statistics said that there was zero output growth from the sector in July.

That was, however, better than the 0.8 per cent contraction that City of London analysts had been expecting and broke a two month run of falling output.

No building

There had been widespread reports of construction projects being put on hold in the run-up to and in the wake of the Brexit vote on 23 June and the lack of decline in the ONS data is likely to be seized upon by pro-Brexit politicians and pundits as further evidence that fears about the economic impact of the result were overdone.

The ONS reported that there was “very little anecdotal evidence at present” to suggest an impact of the referendum on builders’ output.

A host of City of London economists have been revising away their forecasts of recession on the back of a bounceback from survey data from services and manufacturing in recent weeks as well as signs of resilence in consumer confidence.

However, the single month figures for construction output (which is not considered reliable enough to merit the “National Statistics” label) are volatile and the quarterly movement in the index still points to a 1.2 per cent contraction.

The ONS had estimated that construction, which accounts for around 6 per cent of the UK economy, contracted in the first two quarters of 2016, dragging on overall GDP growth, although new revisons now suggest output grew in the first quarter.

In July the ONS said that new private housing output fell 0.6 per cent, private commercial work fell 1.4 per cent and private industrial work fell 0.6 per cent.

It estimates that total repair and maintenance output fell 1.1 per cent.

But that was offset by a 3.9 per cent increase in new infrastructure work.

Trade boost?

Separate data from the ONS today indicates a boost to exports in July from the 10 per cent fall in the value of the pound versus the dollar in the wake of the Brexit vote.

Total exports of goods increased by around £800m, helping narrow the overall trade deficit to £4.5bn in July.

This was down from £5.6bn in June.

“The July trade data give a lift to hopes that net trade will make a positive contribute to UK GDP growth in the third quarter and add to evidence of the economy’s current resilience” said Howard Archer of IHS Global Insight.

However, other analysts were more circumspect.

“We would caution against reading too much into any one month’s figures at the best of times, this is particularly true of trade and construction figures” said Paul Hollingsworth of Capital Economics, pointing out that both were stripped of their status as national statistics in 2014.

Samuel Tombs of Pantheon said it was unlikely the positive effects of sterling’s depreciation were already feeding through to export performance, saying that historically it has taken at least a year for depreciations to boost net trade since it takes time for firms to renegotiate contracts.