Britain’s building sector is officially in recession as housebuilding and infrastructure output both fell in the second quarter of the year. Economists believe this could be an early sign that the wider economy could enter a mild recession later this year.
Overall the construction sector shrank by 0.7pc in the three months to the end of June, following on from the 1.1pc fall in the first quarter of the year. Output fell 1.4pc compared with the same period of 2015.
The figures from the Office for National Statistics looked at the period before the Brexit referendum on 23 June.
Since that vote economic confidence has taken a knock and house prices have shown some signs of slipping. As a result economists believe the construction sector’s recession is likely to get worse.”
“The downturn looks set to deepen,” said Samuel Tombs from Pantheon Economics, pointing to private sector surveys which show a fall in orders placed with construction companies.”
“Brexit negotiations will be protracted, so businesses will hold off committing to major capital expenditure for a long time to come. In addition, the public investment plans won’t be reviewed until the Autumn Statement at the end of the year and few construction projects are genuinely ‘shovel ready’,” he said.
“Accordingly, we think that a slump in construction activity will play a key role in pushing the overall economy into recession over the coming quarters.”
New work on building houses fell 1.1pc on the quarter, while new work on infrastructure dived 3.7pc. Even work maintaining existing buildings fell by 0.5pc in the quarter.
The biggest fall in output over the past year came in government-backed housing construction, which crashed 6.5pc compared with the second quarter of 2015. Private housing slid 0.2pc, while infrastructure output fell 3.7pc on the year.
One area of growth, however, was private industrial construction, which grew by 7.3pc on the year.
Public sector construction firm Scape argued that the downturn means the Government should press ahead with big building projects.
“The Government must not lose sight of its commitment to the Northern Powerhouse or the wider devolution agenda, and ensure investment in vital projects there continues as this will not only provide the area with the boost it needs, but also have a positive impact on the UK economy at a time where uncertainty continues to linger,” said Scape’s chief executive Mark Robinson.
At the same time the eurozone’s biggest economies all slowed down in the second quarter of the year with France and Italy recording no growth at all and Germany’s growth rate dropping sharply.
Overall, the single currency area’s GDP increased by 0.3pc in the three-months to the end of June, just half the 0.6pc it grew by in the first quarter. Germany’s growth rate fell from 0.7pc to 0.4pc, although Greece recorded a surprise bounce, from a fall of 0.1pc in the first quarter to growth of 0.3pc in the second.
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