A sharp fall in housebuilding ahead of the EU referendum dragged down the construction sector in May as firms mothballed projects and delayed new work.
Housing construction tumbled 3.2% during the month after edging down 0.1% in April, the biggest drop since February 2014.
Earlier this week the UK’s biggest housebuilder, Barratt, said it could reduce the rate at which it builds new homes as the company prepares for a possible slowdown following Britain’s vote to leave the EU.
The impact of an underperforming housebuilding sector on the broader industry was to drag down output by 2.1% on the previous month and by almost 2% on the previous year.
Housing output has now fallen in every month this year apart from February, and things could slow further after the 23 June Brexit vote.
The latest figures from the Royal Institution of Chartered Surveyors, published earlier this week, found that buyer interest and expectations of future sales withered in the post-referendum period.
Government cuts to local authority spending were also to blame for a fall in repairs and maintenance activity, highlighting the need for Theresa May’s new infrastructure ministry to boost growth.
Local authority spending on repairs and maintenance has declined sharply in real terms since the middle of 2014, mainly in response to cuts to council budgets.
In May, construction firms reported a fall in new work and repairs and maintenance by 2.6% and 1.4%, respectively.
“The fall in May 2016, taken together with the strength of April’s figures, continues a longer trend of broadly flat output growth since the start of 2015,” the ONS said.
“Within all new work, there were decreases in all work types, except infrastructure. The main contribution to the decrease came from private new housing.”
Chris Williamson, chief economist at financial data provider Markit, said the drop in construction output adds to “what’s looking like an ugly run of data for the sector”.
“It looks like there’s worse to come; possibly much worse. Markit/CIPS PMI survey data recorded the steepest contraction of construction activity for seven years in June as projects were put on hold in the lead up to the EU referendum. Housing and commercial construction were especially badly affected,” he said.
This article was written by Phillip Inman Economics correspondent, for theguardian.com on Friday 15th July 2016 11.07 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010