A construction worker looks on toward skyscraper Tower 42, in the City of London, U.K. on Wednesday, Nov. 2, 2016. Most U.K. bankers believe London will remain Europe’s pre-eminent financial center after Brexit, according to consulting firm Synechron Inc. Photographer: Luke MacGregor/Bloomberg
© Bloomberg

UK construction output during the three months following the EU referendum has been revised higher by the Office for National Statistics after expanding faster than expected in September.

Initially the sector was thought to have contracted 1.4 per cent in the third quarter. This has now been revised up to a contraction of 1.1 per cent after output grew 0.3 per cent in September compared with the previous month.

Construction was the sector that declined by the most in the third quarter growth estimate and is thought to be among the most sensitive to the overall health of the UK economy. However it is a volatile indicator and accounts for only 6 per cent of gross domestic product.

The latest figures provide more evidence that the economy has been more resilient than expected following the referendum. Surveys of purchasing managers and shopkeepers have found that demand in the economy has not slowed significantly.

Kate Davies, ONS statistician, said: “Construction output has remained broadly flat in the past year, both before and after the recent referendum.”

New work in the construction sector increased 2 per cent in September, but this was offset by a 3.4 per cent fall in repair and maintenance on existing buildings.

Infrastructure made up the bulk of new work in September while house building slowed. But over the past four years, it has grown strongly while growth for infrastructure has been more modest. The value, in real terms, of new houses built in September 2016 was 50 per cent higher than the same month four years ago.

New infrastructure work is only 23 per cent higher than it was in September 2012.

“September’s growth is not the start of a stronger trend,“ said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“The construction sector’s outlook will brighten if the Chancellor cancels planned cuts to public sector investment in the Autumn Statement later this month,” he said. “But unlike other indicators, firms’ investment intentions have not recovered since the Brexit vote, so commercial construction still looks set to weaken.”

He added that demand for new houses was likely to slow if real incomes were eroded by inflation and lenders passed on their higher funding costs to mortgage lenders.

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