Business

Construction output strong in July on house building

Newly-built homes with scaffolding on them Image copyright Matt Cardy
Image caption The UK construction sector has returned to growth

A rise in house building helped to boost construction output in July, adding to the picture of a recovering economy, official figures have shown.

The Office for National Statistics (ONS) said building activity rose by 2.2% between June and July.

Further recovery is in the pipeline, with new orders growing strongly.

There were 33% more new orders in the April-June period compared with a year ago, the biggest increase since records began in 2005.

Also fuelling the better figures from the construction industry was an increase in the building of new wind and solar farms.

The construction industry accounts for about 6% of national output.

The figures will further please the Chancellor, George Osborne, who has said the recent spate of positive data showed the economy is "turning a corner".

The news comes as the UK economy shows signs of recovery, but fears are growing of a new housing bubble.

Alan Clarke, economist at Scotia Bank, called the monthly figure "punchy", adding it was a good start to the third quarter of the year.

"Construction is a small component of overall GDP [gross domestic product] - 6.3% - but very volatile, so it can affect growth significantly," he said.

Howard Archer, chief UK economist at IHS, said the improvement in house-building activity was welcome news, given concerns that a shortage of properties risked contributing to a new housing market bubble.

Froth

The Royal Institution of Chartered Surveyors has called on the Bank of England to use its powers to limit house price increases to 5% a year to "take the froth out" of price booms.

Bank of England governor Mark Carney told MPs on Thursday that the Bank was vigilant on house prices, but that parts of the country had not seen any recovery in the market.

In previous speeches, he has said that he has a toolkit in place to keep a lid on any potentially damaging boom.

This includes asking, but not telling, banks to limit how much they can lend to individuals and making them set aside more capital if they want to carry on providing mortgages.

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