New work leads construction growth

The latest data compiled by the ONS shows monthly construction output increased by 0.4% in volume terms in August 2022, the second consecutive month of growth.

The increase in monthly construction output in August 2022 came solely from an increase in new work (1.9%), as repair and maintenance saw a decrease of 2.0%, revealing the effects of a shrinking economy. The level of construction output in August 2022 was 3.2% above the February 2020 pre-coronavirus (COVID-19) level.

At sector level, the main contributors to growth were infrastructure, private industrial and private housing new work.

Alongside the monthly increase, over the past quarter, output saw a slight increase of 0.1%. The increase came solely from an increase seen in new work (1.6%) as repair and maintenance saw a decrease of 2.4%. The latest data brings the tenth consecutive period of growth in the three month on three month series, even though it is the slowest rate of growth since the three months to October 2021.

Commentary from the Monthly Business Survey for Construction and Allied Trades (MBS) and the Business Insights and Conditions Survey (BICS) refers to increasing prices for certain construction products; most notably concrete, plaster, bricks, sand, gravel and asphalt-related products. Alongside the continued narrative around prices, several businesses are continuing to mention labour shortages and the difficulty recruiting new staff continues to have an impact.

Infrastructure, private industrial and private housing new work were the largest contributions to the monthly increase in August 2022, increasing 5.3%, 4.3%, and 1.7%, respectively.

For the second consecutive month, all three sectors in repair and maintenance saw a fall on the month. The 2.0% decrease overall for total repair and maintenance is the fourth fall out of the last five months.

This fall in repair, maintenance and improvement work, reflects reduced consumer spend as a result of the higher cost of living, says the Federation of Master Builders (FMB).

Brian Berry, Chief Executive of the Federation of Master Builders (FMB) said: “Today’s figures showing a 2% drop in repair maintenance and improvement (RMI) work highlight the real term effects of a contracting economy. This is the third consecutive monthly decline in RMI work, which is the backbone of the construction industry and is often an early indicator of what’s to come for the wider sector.

“Small local builders are under increasing pressure to keep their bottom lines in the black, as cash strapped consumers hold back on new projects ahead of a difficult winter period. The Government needs to set out the detail of their pro-growth agenda to help restore confidence in the economy.

“A win-win would be a nationwide energy efficiency plan to make our homes more energy efficient, which boosts jobs and lowers bills. A more immediate shot in the arm would be a reduction in VAT on RMI work, helping builders pass on savings to customers.”

ONS figures from October have also revealed that turnover in the UK construction sector fell by 7.3% last year.

At the beginning of 2021, the sector boasted a turnover of £359Bn, but this fell to £333Bn in 2022.

Mark Tighe, CEO of innovation funding specialist Catax, commented: “The supply of essential materials was massively disrupted last year and may have contributed to the construction sector’s fall in turnover.

“The industry still faces challenges, not least rising inflation which has sent the price of those materials soaring.

“At the same time, the construction industry is critical to the UK’s drive to net zero and so it is vital that it keeps innovating and growing.”

If you would like to read more stories like this, then please click here