Tough quarter for UK construction sector

The British construction sector declined sharply in the first quarter of 2016, adding to signs that the economy struggled against global weakness and uncertainty about June’s European Union referendum, data showed yesterday.

The UK’s Office for National Statistics said construction output, which makes up 6% of the British economy, fell 1.1% in the three months to the end of March — worse than its initial estimate of a 0.9% drop.

The weaker reading reflected a dismal March for construction output, which plunged 3.6% compared with February — the worst month-on-month figure since December 2012. Economists polled by Reuters had expected a 2.5% drop.

March marked a third consecutive decline in month-on-month construction output in the UK — the first such run since the monthly series started in 2010. Housebuilding was the only construction sector to generate growth in the first quarter, with infrastructure the biggest drag.

But for March alone, housebuilding output fell 0.3% after a 2% surge in February. The data underlined Britain’s reliance on the much larger services sector to drive economic growth, which slowed to 0.4% in the first quarter, according to an early estimate last month.

Data earlier this week showed UK factory output levels fell in the first quarter at the fastest annual rate in nearly three years during March.

Yesterday’s construction data did not point to any revision of the estimate of overall GDP released last month, the ONS said.

The ONS warned the March figure may be prone to larger-than-average revisions because of the timing of Easter. Although its figures are seasonally adjusted, Easter this year fell wholly in March for the first time since the monthly series began.

The Bank of England has said that economic data are likely to be hard to interpret in the run-up to the vote on Brexit.

The central bank has highlighted weak commercial property transactions as evidence that companies are holding back investment ahead of the June 23 referendum, which opinion polls show is too close to call.

Construction output fell 4.5% compared with March 2015, the biggest annual drop since March 2013. Economists polled by Reuters had expected a 2.7% decline.