Housebuilding slump begins recovery but ‘more pain to come’

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  • 10/07/2018
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Housebuilding slump begins recovery but ‘more pain to come’
The private house building sector rebounded slightly in May but remained significantly short of its productivity earlier this year.

 

The figures brought a warning that there could be more pain to come for contractors.

According to data from the Office for National Statistics (ONS), the value of private housing new work rose by £78m (2.7%) in May compared to April to reach £2.97bn – up 8.4% from May 2017.

This reflected a positive month for the construction sector as a whole, increasing by 2.9% compared with April 2018.

However, the three months of March to May still compare poorly to the preceding December to February period.

Private housing construction fell by £394m in the three months to May 2018 compared to the previous three.

This was part of a wider overall trend in the construction sector with output falling by £683m using these measures.

 

Housebuilding slowdown

Naismiths managing director Blane Perrotton noted that demand was patchy at best across the country, with new orders in the construction industry “getting fewer and fewer”.

“While we’re still seeing real momentum in the North West and West Midlands, it’s a different story in London and much of the South East, where developers are pausing on new projects and concentrating on finishing existing ones,” he said.

An improvement in the weather has been partly credited for May’s wider economic uptick, but Perrotton added there was little construction industry improvement since the extreme cold weather “slammed the brakes” on many construction sites.

“The industry’s weakness has been magnified by the abrupt slowdown in housebuilding. For years residential construction was a get out of jail card for the building industry as a whole, mitigating the declines seen in other sectors,” he said.

“But housebuilding has fallen further and faster than all others – and now has the wooden spoon for the sharpest drop; output fell by almost £400m in the three months to the end of May.”

Perrotton warned that with workers’ rising wages slicing into contractors’ tight margins, there is likely to be more pain to come for contractors who are forced to bid low for work.

“While deals continue to be done, a sense of political chaos and a stalled Brexit process will do little to provide the one ingredient constriction needs above all others – confidence,” he added.

 

 

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