Sector - Housing
Building Resilience and Driving Growth
In this latest feature for UKCO, Gary Morton, CEO of Newcastle-based The Morton Group, takes a look behind the Office for National Statistics (ONS) latest construction output statistics for September 2020.
Despite taking a severe hit during the first national lockdown and as we approach the end of lockdown 2.0, the construction industry seems to be faring better than every other industry to date and there are positive signs for the future.
The ONS recently published its GB Construction output for September 2020, showing that construction output grew by 2.9% in the month on month ‘all work’ series. This increase was driven by increases in both new work (2.7%) and repairs and maintenance (3.4%). This represents the fifth consecutive month of growth for the construction industry, but the lowest rise in that time.
Like every other industry, construction has suffered from the adverse effects of the first national lockdown when work was halted – but it’s important to state that there are promising signs of recovery. While the latest growth figures are great it’s also fair to say that we as an industry are still recovering ground from pre-pandemic levels.
Construction output in September 2020 was 7.3% below that in February 2020, with only infrastructure and new housing having returned to above their pre-COVID-19 levels. All other types of work in September 2020 have yet to recover, with public new housing the furthest below its February 2020 level at 29.4%.
With Boris Johnson’s commitment to ‘build, build, build’ and ‘build back better’, the UK construction industry is at the heart of the Prime Minister’s recovery plan – especially when we consider the role of infrastructure.
Looking at the overall, all sector national picture, it’s a mixed bag. The UK made record recovery in Q3, growing at 15.5% – but that was still 8.2% below pre-pandemic levels. ONS figures showed Gross Domestic Product (GDP) grew by 1.1% in September, the fifth consecutive month on month growth. But the figures still pointed towards a loss of momentum during the third quarter, with growth six times slower than it was in July.
Despite that, there are plenty of reasons to be optimistic during these difficult times, with third quarter figures pointing to hope and opportunity for the future – not least with potential vaccines on the horizon.
Quarterly construction output grew by a record-breaking 41.7% in Q3 (July to September), compared with Q2 (April to June). Encouragingly, this was driven by record growth in both new work (40.8%) and repair and maintenance (43.4%).
It is the new work which is particularly encouraging, with record quarterly growth in all new work sectors – across the board growth as the industry builds up momentum. It’s pleasing for me to see that the largest contributor was private new housing, which grew by 84.4% in Q3, compared with the previous quarter.
The construction industry has shown tremendous resilience and adaptability between both national lockdowns and this is highlighted in new orders growth, rising from 89.2% in Q3 compared to the previous quarter, following the understandable record fall of 54%.
When it comes to new orders public sector housing was the only sector to report a decline, and the statistics show the quarterly growth was driven by private new housing (88.7%) and all work (89.4%). With the Government’s commitment to build 300,000 new homes by the mid-2020s, I can only see a continued trend for growth in both private and public development arenas.
Of course, 2020 has been anything but ordinary and will live in the memory for years to come. So, I think it’s important to consider the annual figures too. Construction’s annual rate of output growth was up by 0.4% compared to the previous year, and new orders levels were up by 0.6% on the same quarter in 2019.
While the new lockdown may slow growth in the construction sector, and there are challenges of operating COVID-safe sites and implementing social distancing, I am convinced that these latest figures demonstrate continued cause for positivity and optimism. Like many other construction companies, work was paused rather than abandoned and our new order books are fuller than ever.
As an industry and a major contributor to the UK economy, it is imperative that construction gets it right and bounces back – our success is critical to our collective recovery and expansion.
Reassuring and promising, as these construction statistics are, these past few months have certainly demonstrated what can be achieved by our resilient and innovative industry. As we begin to see multiple breakthroughs in vaccine development, everyone in the construction industry is looking forward to building on these firm foundations for a better and brighter future by the end of the year and beyond.
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