UK: Upturn in construction sector boosts recovery hopes

Construction output leapt 4.6% month-on-month in April and remained flat in May, official data show

Construction output leapt 4.6% month-on-month in April and remained flat in May, official data showed today - Credit: PA

Hopes for the UK recovery were given a boost today as official figures confirmed activity in the construction sector jumped in April and held firm in May amid a revival in building work.

New seasonally adjusted data from the Office for National Statistics (ONS) showed construction output leapt 4.6% higher month-on-month in April and remained flat in May.

The figures put the sector on track for growth of more than 2% for the second quarter, which is set to help the recovery in the wider economy gather pace.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “It looks highly likely that construction output made a recently all-too rare positive contribution to gross domestic product growth (GDP) in the second quarter, thereby helping growth to strengthen and broaden from the first quarter when GDP rose 0.3%.”

He added: “Any positive contribution from the construction sector in the second quarter would feel like a bonus for the UK economy, given the sector’s prolonged struggle”.

But the ONS figures suggest May was a trickier month for construction firms after the recent surge in housebuilding activity paused for breath, with private housing new work edging 0.5% lower month-on-month, although it remained 2.7% higher on a year earlier.

Housebuilders have enjoyed the benefits of the Government’s Help to Buy scheme launched in April, which has sent would-be buyers flocking to new developments.

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Despite the dip in May, housebuilders have continued to report surging interest from buyers as a result of Help to Buy, suggesting the housing market should see a sustained recovery over the months ahead.

The ONS also recently revealed UK factory production suffered in May, down by 0.8%, although overall industrial production remained flat in the month.

Experts predict buoyant conditions in the dominant services sector will see GDP growth pick-up to around 0.6% in the second quarter.

The International Monetary Fund (IMF) hiked its 2013 growth forecast earlier this week, pencilling in growth of 0.9% this year, up by 0.3% since its last report following mounting signs of economic cheer.