The UK construction sector has fallen into recession for the first time in four years, official figures confirmed – adding to fears of a wider economic downturn. Britain’s builders saw output fall by 0.7% in the second quarter, worse than an earlier 0.4% estimate by the Office for National Statistics (ONS) and adding to a 0.3% decline in the first quarter. The sector has not seen two successive quarters of decline since 2012. While the figures will not alter the ONS preliminary estimate that the UK grew by 0.6% in the April-June period, they will add to fears of a wider recession later this year.
The construction data showed that the sector declined by 0.9% in June compared to May and by 2.2% compared to the same period last year. The ONS stated the decline was driven by a 0.8% drop in all new work, while repair and maintenance was also 0.5% lower.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “June’s official data confirms that the construction sector re-entered recession in the first half of this year.”
“The downturn looks set to deepen in Q3. Meanwhile, 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’.”
“Accordingly, we continue to think that a slump in construction activity will play a key role in pushing the overall economy into recession over the coming quarters.”
The ONS said as this data covers the second quarter of 2016 plus the month of June, “there is very little anecdotal evidence at present to suggest that the referendum has had an impact on output”.