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Fri July 19 2024

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Construction inflation down to 4.6%

11 Aug 23 Construction inflation is continuing to soften, according to latest data from the Office for National Statistics (ONS).

The annual rate of construction output price growth (inflation) was 4.6% in the year to June 2023.

This has slowed over the past year or so from the record rate of 10.4% seen in May 2022.

The ONS has also published its estimates for construction output in June 2023, showing a 1.6% rise in volume terms. The ONS attributes this to a 2.0% rise in new work, moderated by a 1.1% rise in repair & maintenance output.

At the sector level, six out of the nine sectors saw a rise in June 2023, with the main contributors to the monthly increase seen in infrastructure new work and non-housing repair & maintenance, which increased 4.7% and 3.4%, respectively.

Thanks to June’s uplift, second quarter (April to June) construction output increased 0.3% in over the first quarter, with an increase in repair & maintenance (0.9%), while new work saw a decrease of 0.1%.

Total construction new orders decreased 7.1% (£786m) in Q2 2023 compared with Q1 2023, the ONS says. This quarterly fall came mainly from public other new orders and infrastructure new orders, which fell 32.9% (£576m) and 26.5% (£519m), respectively.

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Commenting on the output figures, Mike Hedges, a director at construction contractor Beard said: “A rise in output, driven by an increase in both new work and repair and maintenance is positive news for the industry to wake up to, and certainly mirrors what we’re seeing on the ground at Beard. A strong June meant quarterly output increased in Q2, which highlights the positive momentum that seems to be building for the second half of the year.

“We’ve seen firsthand this consistent trend of clients looking to improve and repair, rather than replace. For some, this may reflect the tougher borrowing conditions and access to credit that is preventing them from committing to new construction projects. However, we’re seeing greater emphasis being placed on maximising the value of the assets they already have, as well reducing both waste and the loss of embodied carbon.

“Nonetheless, infrastructure new work continues to play an important part in the industry’s recovery, increasing 4.7% in June. This is fourth consecutive monthly increase and comes as no surprise to us at Beard. Frameworks remain incredibly active across the south west and a key driver in pipeline activity, with specialised projects in the likes of healthcare and education.

“The continued easing of inflationary pressures will certainly help in improving the outlook for the second half of the year, especially in sectors such as housebuilding where higher interest rates have had the biggest impact on demand. Even so, the industry must remain agile and respond to opportunities presented by the most active sectors. As ever, we remain vigilant to changing market conditions and the global impact on the UK economy as we look ahead to the end of the year and beyond.”   

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