Growth in construction raises hopes

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Britain's troubled construction industry grew more quickly than thought in the final three months of last year, raising hopes that the economy ended 2012 in better shape than initially estimated.

Official figures showed that construction output rose by 0.9pc in the fourth quarter of 2012 — more than the 0.3pc estimate used to calculate GDP — on the back of stronger housebuilding and infrastructure work.

The revision raised the prospect of the Office for National Statistics (ONS) increasing its final quarter GDP growth estimate when it updates its calculations on February 27. The ONS said that, all else being equal, this revision could shave 0.04 percentage points off the 0.3pc decline.

Construction, which accounts for 6.8pc of total UK economic output, has been one of the weakest spots in the economy — shrinking by 9.3pc last year and remaining 17pc below its peak in early 2008.

However, there were early signs of improvement at the end of last year and Government plans to speed up planing decisions and to funnel more state spending into infrastructure this year and next are expected to help lift the industry further.

The Royal Institution of Chartered Surveyors welcomed the improvement, but said there was still some way to go.

“Significant headwinds continue to challenge the sector with a lack of finance as well as insufficient demand,” it said, adding that “a more positive trend in infrastructure will help to support the headline construction numbers over the course of this year but ... much of the sector will still feel like it remains in recession”.

The fourth quarter construction boost came largely from a 5.9pc increase in output in new private housing compared with the previous three months, and a 4.2pc rise in new infrastructure activity.

However, there was less encouraging news from construction output figures for December, which showed a 16.2pc decline in output in the month and a 15.1pc decline on the year — bigger falls than would normally be expected in a December, and the largest drops since the series started in 2010, the ONS said.

Part of the fall was explained by firms bringing forward construction work that would have been done in December to October and November (Xetra: A0Z24E - news) , it added.