Figures indicate housebuilding decline

The decrease in housebuilding has surprised analysts for bucking the recent trend
The decrease in housebuilding has surprised analysts for bucking the recent trend

A decline in housebuilding has resulted in a worse-than-expected start to the year for Britain’s construction industry, official figures have shown.

Output slumped by 2.6 per cent in January compared with the previous month, which the Office for National Statistics (ONS) said reflected a five per cent drop in housing after a large decline in the number of mortgage approvals for purchase.

The figures came as a surprise to City economists, particularly as a recent survey for the Chartered Institute of Procurement & Supply showed a healthy rate of growth in the construction sector.

The ONS said: “Taken together, the factors constraining demand such as weak mortgage lending and high house prices, coupled with those constraining supply such as skill shortages and tight funding conditions, may have limited construction output growth in January 2015.”

Construction output is now 3.1 per cent below the level of a year ago, which is the first time that a year-on-year decline has been registered since May 2013.

Markit economist Chris Williamson said: “It seems like activity in the sector is set to slow this year, led down by a cooling housing market. Companies also look to be reining in their investment spending, hitting growth of commercial construction.”

However, he said there were signs that the situation was not as bad as portrayed by the official figures, with dividend distributions to shareholders among homebuilders in the FTSE 350 set to rise by around 50 per cent this year.

He added: “Healthy dividend pay-outs indicate that the sector is still in rude health and faring really rather well.”