Fears grow over industry reliance on house building as construction activity falls

House building failed to sustain the growth in construction activity in April according to recent figures, despite it still accounting for a third of the total value of new contracts awarded.

The report released today reveals that the total value of all new construction contracts awarded in April fell by 1.8% compared to the month before, with the number of projects also 6.6% lower than March.

The figures, taken from Barbour ABI's latest Economic & Construction Market Review, which shows that residential construction had the highest proportion of contracts awarded by value in April, with 33% of the UK total.

Only two of the past 13 months have seen residential construction take a slice less than 30% fuelling fears that the construction industry is in danger of becoming too reliant on the housing sector.

The report goes on to highlight London's continued hold on the market, with the capital accounting for 16% of the total value of new contracts awarded.

Four of the top 10 most valuable contracts were located in the city, including phase one of the Leamouth Peninsula residential development worth £200 million, the £95 million Creechurch Place office development and the 'Quantum Leap' redevelopment programme of the London Clinic worth £58 million.

Scotland came out on top overall, accounting for 21% of all contracts by value, but this is mainly due to the Neart na Gaoithe offshore wind farm project off the Fife coast, worth £675 million.

Michael Dall, lead economist at Barbour ABI, said: “With economic output only 0.6% below its pre-crisis peak in Q1 2008, there is no question that the economy is experiencing a growth phase. Construction, too, has continued to grow over recent months, and the recent ONS output figures show the first quarter of this year was at 5.4% higher than the equivalent period in 2013.

“Private housing continues to drive resurgence in the construction industry, boosted by government initiatives such as Help to Buy. However, there are concerns that too much of this growth is concentrated within the housing sector, and an upturn in other key sectors - particularly private commercial and infrastructure - is vital for a stronger and more durable recovery.

“In addition, there have been reports recently of skills shortages affecting the construction industry. Addressing these supply-side constraints is crucial to ensure the long-term health of the industry going forward.”

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