Data shows construction still lags behind wider economic recovery

Construction output fell in March for the second consecutive month, according to the latest official figures.

Data from the Office for National Statistics (ONS), released this morning, shows a 0.4 per cent fall in productivity across the sector, following a 1.9 per cent drop in February.

“Anecdotal evidence received from returns for the Monthly Business Survey for Construction and Allied Trades suggested mixed effects of wet weather decreasing output, but improvement across some sectors within construction because of warmer weather,” the ONS said.

Private new housing output rose by 3.5 per cent but was still 10.7 per cent lower than the March 2023 figure.

Private housing repair and maintenance continued to expand, growing by 2.4 per cent in March – an improvement on the 0.2 per cent increase recorded in February, when it was the only category not to show a fall.

Private commercial work edged up by 0.1 per cent, while output in public housing repair and maintenance rose by 0.7 per cent.

The ONS recorded lower output in all other categories, with public new housing (down 4.8 per cent) and other public new work (down 5.4 per cent) suffering the worst.

Infrastructure contracts also saw a decrease in output, dropping 3.6 per cent.

Clive Docwra, managing director of consultancy McBains, said the latest figures “will give the construction sector further cause for concern”.

Construction is “struggling to keep pace with the wider recovery”, he added, citing official data for the broader UK economy that signalled growth of 1.6 per cent in the first quarter (Q1) of the year.

Other ONS data, also released this morning, showed that overall construction output fell by 0.9 per cent in Q1 compared with October to December 2023, driven by a 1.8 per cent decline in new work.

The only bright spot in Q1 came in January with a return to growth, pegged at 1.1 per cent.

However, total construction new orders grew by 15.9 per cent (or £1.44bn) in Q1 2024 compared with the previous quarter. Growth was driven by new private commercial work and other new public work, which increased by 27.9 per cent and 43.8 per cent respectively.

Kelly Boorman, partner and national head of construction at advisory firm RSM UK, said: “Despite the slight monthly fall in March, the construction industry remains confident in its pipeline due to the significant uptick in construction new orders in Q1 2024, which reflects sentiment in the market that activity is growing and pipeline recovery is strong.”

In contrast, Docwra noted that the construction industry faces “ups and downs over the next few months” with a general election among a “number of variables”.

Scott Motley, head of programme, project and cost management at consultancy Aecom, said the volume of new work is expected to decline in the long term.

“[The] downturn in output puts paid to talk of a recovery for now, as the sector continues to endure challenging economic conditions,” he said.

“Indeed, we expect the pipeline of new work to reduce in the second half of 2024, especially while interest rates remain high and the impending general election gives rise to a pause in infrastructure investment decisions.

“As such, order books are most likely to be filled by short-term repair and maintenance work, as firms continue to adopt a precautionary two-stage approach to major tenders to avoid overstretching themselves in a competitive market.”

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