Sector - Supply Chain
Construction output cools down – ONS
Latest figures from the ONS show that monthly construction output decreased by 0.4% in volume terms in April 2022; this is the first monthly decline seen since October 2021.
Falls in repair and maintenance (2.4%) contributed to the drop in output alongside private housing repair and maintenance and private commercial new work, which decreased by 6.5% and 3.8%, respectively.
The drop in repair and maintenance can be partly explained by rises seen the previous month due to repair works required following storms Dudley, Eunice and Franklin in February 2022.
It’s not all bad news as despite the monthly fall, the level of construction output in April 2022 was 3.3% (£481 million) above the February 2020 pre-pandemic level; new work was 0.7% (£68 million) below, while repair and maintenance work was 11.0% (£549 million) above.
The recovery to date is mixed at a sector level, with infrastructure 35.6% (£669 million) above and private commercial 27.2% (£676 million) below their respective February 2020 levels in April 2022.
The three-month figures also give cause for optimism, with figures showing a 2.9% increase in the three months to April 2022; this is the sixth consecutive growth in the three-month on three-month series, with increases seen in both new work and repair and maintenance (2.2% and 4.0%, respectively). Eight out of the nine sectors saw an increase over the three month period.
Private housing new work, and non-housing repair and maintenance were the largest contributions to the three-monthly rise, increasing by 2.5% and 5.8%, respectively.
In contrast to its monthly increase in April 2022, infrastructure new work was the only sector to have seen a fall in the three months to April 2022, decreasing by 0.6% (£42 million).
Materials supply and cost increases
Looking at the supply issues that had been plaguing the sector over the past months, anecdotal evidence collected from the Monthly Business Survey for Construction and Allied Trades and Business Insights and Conditions Survey (BICS) suggested that this is improving, although some issues remained around certain products. Meanwhile cost increases, particularly for smaller-sized firms, and higher fuel, are prominent in firms minds.
Small builders need support
Brian Berry, Chief Executive of the FMB was concerned about the effect current conditions are having on small builders, said: “Signs of stagnation in construction output should concern policymakers at a time when the smallest firms in the sector are already struggling to stay afloat.
“The cost-of-living crisis hitting consumers, coupled with persistent difficulties in affording pricey building materials and recruiting skilled tradespeople, mean that the months ahead will become increasingly difficult to navigate for these local construction firms.
“At a time when these local building firms should be recovering from the pandemic, they are instead entering another period where survival will be their primary aim.
“It’s imperative that the Government works to ease the pressures, whether via a VAT cut on all home improvements to support the struggling repair, maintenance, and improvement sector, or via the upcoming planning reforms to reverse the decades of decline experienced by small housing developers.”
Gareth Belsham, director of the national property consultancy and surveyors Naismiths, commented: “Economic gravity and weakening business confidence have finally caught up with the construction industry.
“As the momentum of 2021 drains away, the slowdown has turned into a slide – with the sector posting its first monthly fall in output for seven months.
“But so far this is a cooling rather than a collapse.
“On a quarterly basis, the picture is still positive. In the three months to the end of April, output grew by a respectable 2.9%, down from the 3.8% posted in the first quarter of the year.
“But no-one should be complacent. The pipeline of new work is starting to slow, with new orders falling by 2.6% in the first three months of the year compared to the final quarter of 2021.
“Once strong investment cases are being tested by soaring construction costs and nagging questions about what demand for the completed project will be like, and as a result increasing numbers of developers are pausing for thought before committing.
“While many construction firms still have reassuringly full order books for the coming months, the future beyond that is looking rapidly less rosy.”
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