UK construction output falls at fastest rate in six years in January

Builders’ work volumes fell by 3.4 per cent in the month, the largest month-on-month decline since June 2012

There were deep drops in private housing and private commercial construction work (Getty)

Construction output suffered its biggest monthly drop in six years, figures for January show, confirming that the sector’s recession drags on into this year.

The Office for National Statistics reported that UK builders’ work volumes fell by 3.4 per cent in the month, the largest month-on-month decline since June 2012.

It was considerably worse than the 0.3 per cent contraction expected by City of London analysts.

There were deep drops private commercial construction work on the previous month as well as in private housing, which will concern ministers who are trying to drive up constriction rates.

On a year-on-year basis total construction output fell by 0.5 per cent, worsening from the 0.2 per cent rate of contraction in December.

The ONS’s monthly construction index is not an official national statistic and is prone to revision, but the statistics agency nevertheless estimates that construction output, which accounts for around 6 per cent of UK GDP, has been falling since the second quarter of 2017, with a 0.7 per cent decline registered in the final quarter of last year.

Disruption to construction caused by recent snow is expected by analysts to hamper output further in the first quarter of 2018.

Biggest monthly fall since 2012

Surveys suggest builders’ orders have been hit hard by Brexit-related uncertainty. The industry is also worried about a shortage of skilled workers if immigration from the EU falls in the coming years.

The latest Purchasing Managers’ Index for builders suggested that the sector was “flat as a pancake” in February.

“These latest figures are evidence that 2018 began much the same as 2017 ended, a continuation of sluggish output not helped by factors such as ongoing uncertainty over the Brexit deal,” said Michael Thirkettle, chief executive of McBains, a construction consulting agency.

Separately, the ONS reported on Friday that the manufacturing growth rate slowed to 0.1 per cent in January, down from 0.3 per cent in December, suggesting that the sector's recent boom, driven by surging global demand and the weak pound, may be petering out.

Overall industrial production expanded by 1.3 per cent in the month, offsetting the equally sharp fall in December, reflecting the completed repairs to the Forties North Sea oil pipeline.

The ONS's latest trade data shows that the UK's trade in goods deficit widened slightly in January to £12.3bn, up from £11.8bn in December, although the latter estimate was revised down from £13.6bn.

Ole Black of the ONS said the widening of the gap reflected more expensive fuel imports due to the spike in the price of oil.