UK construction output slips in fourth quarter despite December pick-up

British construction output slipped more than expected in the fourth quarter, dragged down by reduced infrastructure spending despite housebuilding increasing at the fastest pace since the start of 2014.

Construction output fell 0.4 per cent in the fourth quarter after a 1.7 per cent decline in the third quarter, the Office for National Statistics said on Friday.

While a bigger drop than the estimate used in preliminary fourth quarter GDP figures, the ONS said that even when combined with the downward revision to industrial output figures earlier this week, they would have only a negligible impact on growth rates.

Construction output rose 1.5 per cent in December alone, in line with economists’ forecasts after a 1.1 per cent drop in November.

For 2015 as a whole, construction output grew by 3.4 per cent – faster than the economy as a whole, but slower than the 7.5 per cent expansion chalked up in 2014.

Total construction output is still 4.1 per cent below its level in early 2008, just before Britain fell into recession.

A steep decline in construction output in the third quarter helped drag on economic growth which matched its lowest rate since late 2012 over that period.

Output in the housebuilding sector rose at its fastest rate since the middle of 2014, growing by 4.1 per cent after a 5.7 per cent decline in the previous quarter.

A lack of new houses for purchase, combined with cheap borrowing costs and record employment levels, is the main reason why house prices have been rising at a fast pace over the last year, after the market cooled in 2014.

In January, British property valuers reported a surge of activity as investors tried to beat an increase in transaction taxes on rental investments coming into force in April.