Housebuilding in Britain picked up to a record high in February but the rest of the construction sector struggled amid signs that uncertainty over the EU referendum and public spending cuts are denting activity, according to official figures.

The Office for National Statistics said private housebuilding rose 3.9% from January, the fastest growth for 10 months and taking it to the highest level since records began in 2010.

The housebuilding figures will be welcome news for the government following pledges to address Britain’s long-standing housing shortage. However, other indicators from the construction sector have been more downbeat and more timely surveys suggest housebuilding waned in recent weeks.

The ONS said the whole construction sector, which makes up 6% of the UK economy, shrank 0.3% in February. That was worse than economists’ forecasts for no change in output, according to a Reuters poll.



In the three months to February, construction output was up 1.5%, the fastest growth for almost a year, thanks largely to strong monthly growth in December.

“Despite construction output dipping for a second month running in February, it still looks likely that construction saw some growth in the first quarter of 2016,” said Howard Archer, economist at IHS Global Insight.

But he said the outlook remained tough for building companies. “With output muted over the first two months of the year and March survey evidence from both the purchasing managers and the Bank England’s regional agents soft, it does appear that the construction sector is currently finding life hard going,” Archer said.

A survey of the sector released earlier this month, the Markit/CIPS UK construction purchasing managers’ index (PMI), showed housebuilding slowed in March to the weakest pace for more than three years as construction firms said an uncertain outlook had curbed spending among clients.

On Thursday, the Royal Institution of Chartered Surveyors (RICS) warned that the 23 June referendum and recent changes to stamp duty had created a climate of uncertainty that could lead to falling sales and prices in the housing market.

The Bank of England also joined the chorus this week and noted signs that uncertainty relating to the EU referendum had begun to weigh on certain areas of activity, as some decisions, including those on capital expenditure and commercial property transactions, were being postponed. Minutes from its latest interest rate setting meeting showed policymakers believed the pre-referendum fog could dent economic growth in coming months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics said there were further signs that fears of a Brexit were hurting economic growth in the construction data, notably the 9.6% plunge in new private industrial work and a 0.6% drop in private commercial work.

“The latest construction figures provide more evidence that concerns about the EU referendum are sapping the recovery of its momentum,” said Tombs, adding that pressure on construction from the government’s austerity drive had also had an impact.

“The fiscal squeeze also is to blame for the sector’s troubles. Public construction and infrastructure, which is 40% attributable to the public sector, both fell by 1.8%. The one bright spot remains new private housebuilding.”

On markets, the upbeat official figures on housebuilding were overshadowed by referendum worries among investors, with housebuilders’ share prices dropping in morning trading on Friday.





