Sector - Commercial
ONS reports quarterly drop
The latest figures from the ONS show a drop in construction output over the last quarter, although the monthly figure shows a small rise from August.
Monthly construction output grew 1.3% in volume terms in September 2021, with new work and repair and maintenance leading the growth. This is the first monthly increase since June 2021. However, construction output is still registering 1% below the pre-pandemic levels – a drop of some £141M.
In contrast to the monthly growth, quarterly construction output fell 1.5% in the Quarter July to September 2021, compared with Quarter 2 2021 – a huge drop of 9.2% in new orders contributed to the fall in levels. Despite monthly figures rising in August and July, the September figures have resulted in a drop in output over the last quarter. This is the first quarterly fall since Quarter 2 2020, after four successive increases in quarterly growth.
Price rises are still being felt throughout the sector, with the annual rate of construction output price growth registering at 5.1% in September 2021; this was the strongest annual rate of construction output price growth since records began in 2014.
Companies report that not only are prices rising for raw materials such as steel, concrete, timber and glass, difficulties in sourcing these materials have contributed to the overall fall in the quarter. Companies also alluded to supply chain issues with comments suggesting that while order books were healthy, the availability of certain construction products was affecting projects currently underway.
Non-housing repair and maintenance was the largest contributor to the monthly increase, growing 2.6% (£67 million). Public other new work and infrastructure new work also saw large increases in September 2021, of 7.2% (£50 million) and 1.5% (£40 million) respectively.
Over quarter 3, infrastructure has seen strong growth up 10.0% (£739 million) in the three months to September 2021. Anecdotal evidence suggests the infrastructure increase is from projects such as High Speed 2, motorway improvements, and green energy developments.
Evidence from the Business Insights and Conditions Survey (BICS) for October 2021 shows that 25% of the construction businesses reported that they were able to get the materials, goods or services, but had to change suppliers or find alternative solutions. The survey also shows that 10% were unable to source materials, goods or services needed from within the UK in the last month. The construction sector was the highest of any sector in reporting supplier issues.
Brian Berry, Chief Executive of the FMB said: “The 1.3% improvement in construction output in September is a positive turnaround from the fall in previous months. The 1.5% drop in overall output for Q3 2021, from Q2, signals the continued need for action to be taken to resolve building material and skills shortages. Through the FMB’s State of Trade Survey for Q3, we know that 89% of small, local builders have been forced to press pause on jobs as a result of material and labour shortages, with 97% having experienced increased material costs. The fact that we are now experiencing the strongest annual rate of construction output price growth since records began indicates the unhealthy effects of these two issues on the sector.”
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