UK construction output nears 2-year high buoyed by housebuilding

Construction returned to growth in October as a rise in house building helped the sector expand by 2.2%, reaching a near two-year high level of output.

Official figures also showed the sector had performed better than thought earlier in the year, with revisions large enough to add 0.1 per cent to overall gross domestic product (GDP) growth in each of the first and third quarters.

Meanwhile a slump in September was not as bad as had been feared - construction shrank by 0.5 per cent rather than 0.9 per cent.

The latest data from the Office for National Statistics (ONS) showed output for the sector in October reached £9.8 billion, the highest level since December 2011.

New housing work increased by 5.8 per cent, with the market bolstered by Government initiatives such as Help to Buy.

Infrastructure was up 7.5 per cent but other public work fell 5.7 per cent and private industrial work showed a disappointing drop of 5.8 per cent, although new orders for planned projects in this sphere showed promise, up 31.8 per cent.

Data revisions to the construction sector's performance earlier during 2013 would be large enough, on their own, to increase overall GDP growth for the first quarter from 0.4 per cent to 0.5 per cent and for the third quarter from 0.8 per cent to 0.9 per cent.

However, new quarterly GDP estimates to be published next week must also take account of any revisions, upward or downward, in other parts of the economy.

Chris Williamson, chief economist at Markit, said: "The UK construction industry is enjoying a strong and increasingly broad-based recovery, according to the Office for National Statistics, meaning the sector should help boost the economy in the fourth quarter."

Howard Archer, of IHS Global Insight, said: "The improvement in construction activity is being led by house building, which is obviously a reflection of the much-improved housing market.

"Increased house building is particularly welcome news given that a shortage of properties is a major factor repeatedly putting upward pressure on UK house prices.

"Nevertheless, the fact remains that there needs to be extended, very strong house building to make significant inroads into the problem."

PA