Surge in new homes but building sector slips back

A housebuilding surge failed to offset a summer blip for the wider building sector as industry output slipped back marginally.

The Office for National Statistics said yesterday that construction output – which accounts for 6.3 per cent of the overall economy – edged 0.1 per cent lower during August, although the previous month’s advance was revised up to a 2.8 per cent rise.

August’s reverse came as a 1.6 per cent jump in private-sector housebuilding – fuelled by easing mortgage conditions and the Government’s Help to Buy scheme – was offset by lower levels of infrastructure and maintenance work. But despite the volatile monthly figures, construction output remains 4 per cent ahead of a year earlier and the sector has seen three months in a row of annual growth for the first time in more than two years.

The industry remains nearly 15 per cent below its pre-recession peak, but the recent advance is being fuelled by private housebuilding – up by 18.1 per cent year on year and growing at the fastest annual pace since June 2011. Construction is likely to bolster buoyant growth figures for the July to September quarter due in two weeks’ time.

Martin Beck, a UK economist with Capital Economics, said: “New construction orders were up 33 per cent year-on-year in the second quarter. So although a small sector, the strength of the rebound means it may play a major role in the recovery.”