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Construction output growth starts to normalise

9 Oct 20 Monthly construction output grew by 3.0% in August 2020 compared to July, representing some sort of return to post Covid statistical normality.

Such was the impact of the spring lockdown, the construction output in the summer recorded month-on-month growth rates of 21.8% in June and growth of 17.2% in July.

Despite the further 3% growth in August, the level of construction output in August 2020 – at £12,455m – remains 10.8% below the February 2020 level.

Over the three months to August 2020 construction output grew by a 18.5% compared with the previous three-month period. This is a record high for a three-month period and comes on the back of 10 consecutive periods of decline.

New work increased 17.5% in the three months to August 2020 because of growth in all new work sectors apart from private industrial, which fell by 6.5%; the largest contributor to the growth was private new housing, which grew by a 34.9%.

Repair & maintenance grew by 20.3% in the three months to August 2020 because of record growth in all repair & maintenance sectors; the largest contributor was private housing repair and maintenance, which grew by 35.6%.

Source: Office for National Statistics – Construction Output and Employment
Source: Office for National Statistics – Construction Output and Employment

While 3% monthly growth would be considered healthy at other times, with the industry still on the rebound, some commentators were hoping for rather more.

Gareth Belsham, director of the surveyors Naismiths, said: “The construction industry as a whole has been brought down to earth with an almighty bump, but house-building is booming. The gravity-defying, record-smashing growth of June and July was always going to be a tough act to follow.

“Overall the August data is a serious misfire. Even the most cautious predictions expected more from the month than this, and the recovery is starting to look less v-shaped and more r-shaped. Total construction output is still nearly 11% adrift of its pre-Covid level and the boom seen at the start of 2020 might as well be years, not just months, ago.

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“But while things remain bleak in much of the commercial property sector, the impact of Britain’s house price boom is re-energising residential construction. Housebuilders are racing to respond to surging demand, and new residential work spiked by £310m in August, far more than all the other subsectors combined. By contrast, new industrial work is still a punishing 40.9% down on its pre-pandemic level as subsectors within the construction industry start to head in opposite directions.

“Few sectors are better at responding to boom and bust than construction, but the worry now is that as the momentum of the summer’s bounceback fades, uncertainty will chip away at business confidence, depressing tender prices and creating a more polarised construction industry.”

Clive Docwra, managing director of construction consultant McBains, said: “The construction industry will welcome these figures which show a fourth consecutive month of growth since the record low of April.  But after construction output picked up significantly in June and July, today’s figures – which show growth slowing to 3% – bear out just how shaky the foundations are for the industry at the current time.

“Output still remains well below its pre-pandemic levels and although private new housing work showed strong growth, new industrial and commercial work is still declining.

“The unpredictability around further lockdowns is causing private commercial investors to remain cautious of committing to new developments.  The government needs to ramp up its public infrastructure programme and speed up procurement to help tide the sector over while this fragility persists.”

Fraser Johns, finance director at construction contractor Beard, said: “If you’d said to me a year ago that construction output had grown by 3%, we’d have considered that a decent rate of growth. However in the context of the previous increases of around 17% for July and 23% for June, some might say it feels like we’re coming to a grinding halt. But I don’t think that’s necessarily the case.

“This is the level of growth that you might expect in normal conditions and in fact the ONS data shows the three-month period to August was a record high at 18.5%, albeit from a low base. So this tells me the construction sector is learning to live with coronavirus and is getting on with the job. This sector, more than many, had to adapt fast to the changing conditions in order to keep our sites open and projects on the move, and the fact that its outperformed overall GDP growth at 2.1% is testament to that.

“So while there’s no doubt that as a country we’re heading into a difficult winter, with the ongoing impact of coronavirus coupled with the inevitable uncertainties of Brexit, we can’t underestimate the scale of recovery that is underway due to the resilience of those working in the construction sector.”

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