UK construction sector weakened in February despite a spike in construction of new homes

The UK construction sector weakened for the second month in a row in February, according to the Office for National Statistics, but construction of new homes spiked.

Construction output declined 0.3% in February compared to the month before, mainly due to drops in new work and repair and maintenance activity. Total maintenance activity fell by 0.5% in the period.

It wasn’t all bad news though. The ONS report revealed that private sector new housing work surged 10.6% in February compared with last year. Over the three months to February housebuilding rose 6.7%.

3D printed house
Recent government efforts to boost housebuilding, such as the ‘Help to Buy’ scheme, appear to have worked.

New housing work in the private sector has benefited from the Government’s Help to Buy scheme which provides equity loans to both first-time buyers and home movers on new-build homes.

Despite a dip on a monthly basis, over the three months to February as a whole, construction output increased 1.5% compared with the previous quarter – the fastest pace in nearly a year.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The construction sector is seemingly currently being affected by increased caution among clients – especially for major projects – amid heightened UK economic uncertainties that are being magnified as June’s EU referendum looms.”

The ONS data was not as gloomy as the Markit/CIPS construction purchasing managers’ index last week which suggested that housebuilding activity expanded at its slowest pace in over three years.

The lull in the UK construction sector is believed to have been impacted by ‘Brexit’ fears, as well as a tax rise on purchase of property by landlords which took effect on April 1.

On Thursday the Bank of England warned that some decisions “including on capital expenditure and commercial property transactions, are being postponed pending the outcome of the vote”.