UK economy fails to fire on all cylinders as construction output falls


The UK economy failed to reach top gear in October, as the manufacturing sector expanded but the construction industry continued to slump.

Figures from the Office for National Statistics (ONS) showed construction output unexpectedly fell by 1.7% on the month, as the industry was dragged down by a 1.5% decline in new work.

The picture was also bleak for the three-month period to October, with output dropping by 1.4% following a 3% slide in repair and maintenance work.

However, contracts linked to the £56 billion HS2 rail line ensured new orders leapt by 37% between July and September, brightening the outlook for the beleaguered sector.

In a contrast of fortunes, Britain's buoyant manufacturing industry delivered another robust performance in October, expanding by 0.1% as the wider industrial production came in flat.

ONS statistician Kate Davies said: "While manufacturing was relatively subdued overall in October despite record production of cars destined for export, the longer-term picture is one of strong growth."

She added: "Construction output continued to fall back from its peak at the start of the year, with both new building and repair work faltering once again."

Separate figures on UK imports and exports showed the total trade deficit widened by £300 million to £1.4 billion between September and October, as goods imports jumped 1.6%.

Over three months to October, the trade deficit - excluding erratic commodities - expanded by £800 million to £6.9 billion, as goods imports rose by £3.3 billion and good exports climbed by £1.4 billion.

The pound showed little movement following the slew of economic data, with sterling marginally lower against the US dollar at 1.34 and 0.3% higher versus the euro at 1.14.

Howard Archer, EY Item Club's chief economic adviser, said: "Mixed news on the UK economy at the start of the fourth quarter, with the positives coming from healthy underlying manufacturing output and stronger exports in October but another sharp drop in construction output being a serious negative.

"The trade deficit widened modestly in October but decent export growth raised hopes that a competitive pound and healthy global growth could be having more of a positive impact."

The figures come after previously released data showed the UK economy accelerated to 0.4% in the third quarter, with the lion's share of the expansion coming from the services and manufacturing industries.

However, economic growth is still struggling to bounce back to levels seen in the final quarter of 2016, when GDP rose by 0.6%.

Dr Archer added: "We currently expect fourth-quarter GDP growth to come in at 0.4% quarter on quarter again, but much will depend on how well the services sector performs and how much consumers spend over the crucial Christmas period."