A good quarter in a bad half for construction

A good quarter in a bad half for construction

Construction output rose 1.4% in the second quarter of this year compared with the first, according to the latest ONS data.

You might think: “Whoopee here we go!”

But we’d have hoped for, if not expected, some bounce back after the first quarter of the year came in at its lowest level for a single quarter for more than a decade.

If we compare the first half of this year with the final half of last the numbers suggest the industry did less work, when seasonally adjusted.

The big question however is whether this upturn represents a real turning point for the construction industry.

The truth is that it’s hard to make a cool judgement on the latest construction data without getting sucked into the excitement and exuberance over recent positive data. And then there’s the widening belief that the “master stroke” of Help to Buy is set to propel construction from its mire.

Yes, construction output in seasonally non-seasonally adjusted volume terms was better in June than at any time since, well, November last. And yes we have seen an upturn. But the confounding factors such as weather confuse the picture.

What is clear is that housing does appear to be the driving force at the moment. Private housing output in the second quarter was at its strongest for a couple of years.

Sadly we are not yet seeing in the figures a widespread recovery in construction. Commercial sector output remains subdued, infrastructure seems to have come off the boil and repair and maintenance work, while up on the quarter, is still off where it was a couple of years ago.

It is good news that private house building is picking up. Any boost to housing is to be welcomed. This is not just because it boosts construction but because creating more homes is essential to the wellbeing of the nation’s citizens and the effectiveness of the economy overall.

Without doubt, and certainly at the moment with a rapidly rising population, it can be easier to justify and to fund a boost to house building than many other forms of construction. I certainly have argued for such a boost as long ago as 2008. It would have spared the industry much pain, supported the economy and paid for itself handsomely by now.

Personally, I’m not convinced by Help to Buy as the propellant. It carries with it, in my view, unnecessarily high risks of a short-term boom and blowout.

But more importantly, even if the private house building sector were 50% bigger, which will take some years to achieve, it would only put construction back to where it was 18 months ago.

The industry needs to see stronger signs of increased activity elsewhere if it is to enjoy a more sustainable recovery.

So, while we might welcome these figures, it is important to wait and see before cracking open the champagne and celebrating a recovery in construction.

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