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Late data from the first three months of this year also showed the contraction in construction output was shallower than expected Photo: Alamy

UK growth boost as construction shake-up reveals stronger economy

WT24 Desk

The UK economy grew at its strongest pace in more than a decade last year, official data indicated on Friday, after changes to the way construction data are measured showed the sector expanded at a more robust pace than previously thought.The Office for National Statistics (ONS) said revisions to the way it measures construction output showed the sector added an extra 0.1 percentage points to UK growth in 2014.

This suggests the UK economy grew by 2.9pc last year, which is up from an official estimate of 2.8pc. This would be the strongest expansion seen since 2003, when the economy grew by 4.3pc.Late data from the first three months of this year also showed that the contraction in construction output was shallower than expected. This suggests that UK growth will be revised up to 0.4pc in the first quarter, instead of the 0.3pc estimate that was previously published.

Recent weakness in construction had been linked to uncertainty ahead of May’s general election, though a survey by Markit last week showed confidence among construction firms hit a nine-year high after the Conservative party secured a decisive victory.“The revisions bring the economy’s performance more into line with recent survey evidence,” said Chris Williamson, chief UK economist at Markit.

The ONS’s initial estimate showed the construction sector, which accounts for 6.4pc of UK output, contracted by 1.6pc in the first three months of the year, which was revised to a 1.1pc contraction last month. Output is now estimated to have decreased by 0.2pc, with the upward revision of growth adding 0.1 percentage points to UK growth in the first quarter. The ONS stressed that Friday’s data formed part of an interim shake-up of the way construction data are calculated, and that UK growth could be revised up or down again in future months.

However, Friday’s data also showed that monthly construction output fell by 0.8pc in April, from 1.4pc in March. Compared with a year earlier, construction output rose by 1.5pc, slowing from an increase of 5pc in March. Samuel Tombs, an Economist at Capital Economics, said monthly data tended to be volatile and were often revised. “The underlying indicators are positive – construction orders increased by a quarterly 0.4pc in the first quarter and [construction surveys] in May also point to growth. Meanwhile, credit constraints have loosened and recent reports suggest that the labour and raw material shortages that held the construction sector back last year have now begun to ease,” he said.

“[All of this] strengthens our view that the UK economy is not on the brink of a renewed slowdown” , reports The Telegraph.

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