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Wed September 23 2020

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Construction new orders reach all-time low

12 Aug Construction new orders collapsed to an historic all-time low in the wake of the Covid-19 lockdown, official statistics show.

New orders in Great Britain decreased 51.1% in the April-to-June second quarter of 2020, compared with the first quarter (seasonally adjusted).

The value of new orders for the period – £6,173m – was the lowest level of new orders since records began in 1964, the Office for National Statistics (ONS) said.

The ONS numbers show that quarterly construction output fell by a record 35.0% in Q2 2020,  compared with Q1. This was driven by record falls of 35.2% in new work and 34.7% in repair & maintenance.

The largest contributor to the Q2 decrease in new work was private new housing, which fell by 51.2% compared with Q1.

Much of the damage was caused at the start of lockdown in late March and the subsequent site closures during April. By May the construction industry was mostly going back to work (if not in Scotland), while June was the month it returned to something closer to full speed.

Monthly construction output in Great Britain grew by a record 23.5% in June 2020 to  £10,140m, substantially higher than the previous record monthly growth of 7.6% in May 2020.

But despite this strong monthly growth, construction output in June 2020 remains 24.8% or – £3,343m – below the February 2020 level, before the coronavirus pandemic took hold.

Apart from April and May 2020, the level of all work construction output in June 2020 was the lowest since January 2013.

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Industry comment

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, said: “June’s record-smashing, gravity-defying spike in output shouldn’t distract from what has been a frankly brutal three months for the construction industry. With total output down by more than a third over the quarter and new orders shrinking to less than half the level registered during the ‘Boris bounce’ mini-boom seen at the start of the year, this is nothing if not white knuckle stuff.

“Nevertheless as the industry licks its wounds and resets, there are a few rays of light. Output has increased for two months in a row and momentum is increasing. June’s 23.5% surge was triple the 7.6% growth seen in May. The recovery is still young and fragile, but so far it is taking the hoped-for V-shape.

“The impact of the pandemic is redrawing the industry map too. Private sector housebuilding, for years construction’s star performer, collapsed by more than half in Q2 – more than any other construction subsector. With building sites now fully open across the UK, albeit operating under strict social distancing rules, the fightback starts here.

“But the pipeline of new work is slowing alarmingly fast. The total value of new orders placed in Q2 sank to the lowest level seen since records began more than half a century ago. The construction industry is a master at riding out recessions, but this one is likely to test it like never before.”

Fraser Johns, finance director at construction contractor Beard, said: “It should come as no surprise that Q2 has been a very difficult one for the construction sector, as well as for the economy as a whole.

“While undoubtedly welcome, a second consecutive month of rapid growth, with output in June up 23.5% compared to May, cannot obscure the low base from which that starts.  Over Q2 as a whole, output has fallen by more than a third (35%) and remains down by about a quarter (24.8%) on its pre-coronavirus levels in February.

“The construction industry needs to focus on delivering for its customers and demonstrating the value high-quality building can bring. But to get back on its feet, the industry needs new work. Sadly, the ONS figures also show orders falling by more than half (51.1%) in Q2 and they are now at the lowest level since records began more than half a century ago.

“As the economy recovers and investor confidence returns, this will no doubt improve. This cannot come soon enough, however, and the Government’s ‘build, build, build’ message remains a vital one.”

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