UK construction industry hit by slowdown in October

Infrastructure fell furthest, despite government pledges to stimulate the economy through building

(Reuters)

Britain’s builders suffered a surprise slowdown in October, new figures reveal.

The sector shrank by 0.6 per cent in the month compared with growth of 0.9 per cent in September and economists' forecasts of a 0.2 per cent rise.

The biggest fall was infrastructure, with a large fall in orders for public projects such as schools and hospitals, the Office for National Statistics said. Repair and maintenance work remained flat.

The news comes as Chancellor Philip Hammond announced £23bn in infrastructure spending between 2017 and 2022 that will focus on housing and research and development.

The number of new projects starting fell by 0.9 per cent compared with the previous month. However, over the year output was up 0.7 per cent.

New house building increased by 2.4 per cent month-on-month and 12.6 per cent year-on-year in new house building in October, but the amount will do little to combat the UK’s acute housing shortage.

Construction – which accounts for 6 per cent of British economic output – is volatile on a monthly basis and accounts for a disproportionate amount of revisions in quarterly economic growth data.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “While latest surveys offer some grounds for hope on the construction sector, there are still significant uncertainties for the sector going forward – particularly regarding some clients willingness to commit to major projects.

“The clear possibility that the economy will slow appreciably over the coming months despite its current resilience and an uncertain outlook for the housing market are also concerns for the construction sector.”

The figures cap a disappointing month for UK industry, after activity fell at its worst rate for four years in October, driven by a sharp contraction in mining and quarrying.

Last month the Bank of England said it expected housing investment to suffer less from the immediate impact of June’s vote than first thought.

It predicts a slowdown in housing investment growth to 0.25 per cent next year from 4.75 per cent in 2016, compared with earlier forecasts of an outright fall next year.