The UK construction trade suffered a worse-than-expected start to the year, according to official figures.
Output slumped by 2.6% in January compared with the previous month, which the Office for National Statistics said reflected a 5% drop in the housing market.
The figures which came as the demise of Dundee’s premier building firm Muirfield Contracts was confirmed yesterday surprised City economists, particularly as a recent survey for the Chartered Institute of Procurement and Supply showed a healthy rate of growth in the construction sector.
“Taken together, the factors constraining demand such as weak mortgage lending and high house prices, coupled with those constraining supply such as skill shortages and tight funding conditions, may have limited construction output growth in January 2015,” the ONS said.
Construction output is now 3.1% below the level of a year ago, which is the first time that a year-on-year decline has been registered since May 2013.
Markit economist Chris Williamson said: “It seems like activity in the sector is set to slow this year, led down by a cooling housing market.
“Companies also look to be reining in their investment spending, hitting growth of commercial construction.”
However, he said there were signs the situation was not as bad as portrayed by the official figures, with dividend distributions to shareholders among homebuilders in the FTSE 350 set to rise about 50% this year.
He added: “Healthy dividend pay-outs indicate that the sector is still in rude health and faring really rather well.”
Meanwhile, calls for an inquiry into the blacklisting of construction workers have been stepped up after claims undercover police spied on trade unions.
There have been suspicions police were involved in the blacklisting of 3,200 people, which came to light when Consulting Association offices were raided in 2009.
Home Secretary Theresa May has appointed Appeal Court judge Lord Justice Pitchford to head an inquiry into undercover policing and the operation of the Metropolitan Police’s controversial Special Demonstration Squad.