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UK construction output rises in July, new orders leap in second quarter

LONDON (Reuters) - British construction output growth sped up to 2.2 percent in July from June and there were signs of more expansion to come as new orders leapt in the second quarter.

Friday's data will add to hopes that the economy is picking up speed in the third quarter and are likely to be welcomed by Chancellor George Osborne. His plans to boost housing have been criticised for not doing enough to spur new home-building.

Construction output rose 2.0 percent in year-on-year terms in July, the Office for National Statistics said on Friday.

In June, construction output fell 1.1 percent on the month and rose 2.2 percent in year-on-year terms.

Britain's construction industry was hit hard by the financial crisis but has shown signs of a recovery in recent months, helped by a broader pickup in the economy and by government and Bank of England programmes to encourage mortgage lending and new home-building.

New orders in the construction sector jumped nearly 20 percent in the April-June period from the previous three months, boosted by housing and the building of new wind and solar farms, to show its biggest jump in four years. Annual growth of 32.8 percent in construction orders was the biggest since records began in 2005.

A private sector survey of the construction industry in August, published last week, showed activity hit its fastest growth in nearly six years after a strong performance in July.

Earlier on Friday, a group representing British property surveyors called on the Bank to limit annual house price inflation to 5 percent to prevent another property bubble.

Construction accounts for about 6 percent of British gross domestic product.

British GDP grew 0.7 percent in the second quarter, helped in part by the turnaround in construction. Some economists have predicted growth could pick up to more than 1 percent in the July-September period.

ONS officials said the contribution of construction to GDP in the second quarter was slightly stronger than previously estimated but not by enough to make a change to the overall growth rate of the economy during the period.

Despite the growth, British construction output remains nearly 15 percent below its pre-crisis peak in 2008.

(Reporting by William Schomberg and David Milliken)