UK economy grows thanks to construction

Figures from the Office of National Statistics show that the UK economy grew by 1.2% in the three months to June, mainly thanks to a 9.5% rise in construction output.
There was a spurt in housebuilding during the period, mainly on the back of funding from the previous Gvernment, but some economists think it may be down to a sharp recovery after a hard winter, as was the case in 1963.

Mike Leonard Director of the Modern Masonry Alliance, said: “Whilst these figures are obviously pleasing and reflect the absolutely pivotal role the construction industry plays in driving the whole UK economy, I fear for the immediate future.”

“Much of the current performance is in the housing sector which has been supported by a range of fiscal incentives such as the “Kick-Start” scheme. If this stimulus is removed at a time when the banks are still failing to lend to businesses and home purchasers it is inevitable that the performance of UK plc will greatly suffer.”

Jeremy Coo

k, chief economist at World First, said: “The figure is still very reliant on a 9.5% increase in construction spending, a phenomenon that will not be replicated in Q3, so a drop in growth is almost inevitable at the next reading.”

Howard Archer, chief European & UK economist at IHS Global Insight, said that the second quarter growth was as good as it gets for the economy for some time.

“The second-quarter growth pace is clearly unsustainable in the face of major headwinds, most notably including tight fiscal policy increasingly biting, persistent tight conditions, slowing global growth and pressurised consumers,” he said.

The figures revealed household disposable income fell by 1.6% in the latest quarter, following a rise of 0.5% in the first quarter.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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