Construction in recession as Q2 output falls

Construction output fell during the second quarter of 2016, according to figures released today by the Office for National Statistics.

This is the second consecutive quarterly fall in output, meaning the construction industry is technically in recession. From April-June output fell an estimated 0.7% in comparison to the Q1 period Jan-March 2016, during which construction output fell 1.1% below that of the fourth quarter of 2015, according to the last two ONS bulletins published for the sector this year.

A previous forecast fall of 0.4% for the 2016 Q2 output has been revised downwards by 0.3 percentage points, based on survey responses, the ONS says. Output is estimated to have decreased by 1.4% on the Q2 figures of 2015.

The ONS figures are based on results from monthly surveys of 8.000 British businesses and are intended to be a short term estimate of output by public and private sectors.

The Q2 2016 drop in output is due to falls in all new work, but infrastructure has taken the biggest hit, dropping 3.7%. This is the third consecutive quarterly fall in infrastructure output, which has fallen 10% in comparison to Q2 2015. 

Market intelligence lead for Arcadis, Will Waller, said: “The figures show that infrastructure saw a bumper year in 2015 and despite the double digit fall in Q2 of this year, the numbers still represent a relatively high level of output in the historical context. The fall in infrastructure is most likely due to a sectoral cyclical peak rather than a broader Brexit-related slowdown in the industry.  This is demonstrated by relatively robust performance in the commercial and private housing sectors. However, we know from other indicators that there will likely be a Brexit-related slowdown in these sectors.  This emphasises the need to avoid future indecision on infrastructure spending, as well as consideration of support for public sector housebuilding.”