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Wed December 02 2020

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Construction output starts to grow

11 Feb Construction output rebounded in 2019 to grow by 2.5% in Great Britain, having seen zero growth in 2018.

Latest data from the Office for National Statistics show that in the fourth quarter of 2019 construction output increased by 0.5% compared with Q3 (July to Sept) 2019. This was driven by a 0.8% growth in new work, which offset a 0.1% fall in growth in repair & maintenance.

The 0.8% rise in new work in Q4 2019 was because of growth in all sectors apart from private new housing and public other new work, both of which fell 1.1%. The largest positive contributions came from private commercial and public new housing, which grew by 2.5% and 8.4% respectively.

In repair & maintenance, the 0.1% fall in Q4 2019 was driven by a 2.9% decrease in private housing repair & maintenance. In comparison, non-housing and public housing repair & maintenance grew 1.6% and 0.9% respectively.

In the month of December 2019, construction output in Great Britain increased by 0.4%, driven by a 0.8% growth in new work, offsetting a 0.4% fall in repair and maintenance.

The 2.5% increase for 2019 was predominately driven by a 3.4% growth in new work and, to a lesser extent, a 0.7% increase in repair & maintenance.

The Construction Products Association is forecasting that total construction output in Great Britain will fall by 0.3% in 2020, before a rise of just 1.2% in 2021.

Industry comment

Federation of Master Builders chief executive Brian Berry said: “Despite toxic uncertainty, political ups and downs and bad weather in 2019, it is a testament to the resilience of the construction sector that it grew by 2.5% last year.”

“However, the positive overall figure for last year shouldn’t mask the disappointing performance of the repair & maintenance sector which saw minimal growth of 0.7% and a fall of 1.7% in private housing repair and maintenance”

“A national retrofit strategy would help boost the domestic repair and maintenance sector, providing confidence and support to homeowners and builders to make the necessary upgrades to our ageing housing stock. At this same time, this would help to reach net-zero emissions by 2050.”

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Clive Docwra, managing director of construction consultant McBains, said: “Today’s figures are a sign of the real potential of UK construction in 2020. It shows overall output increased again, albeit more slowly, in the final three months of last year by 0.5%. This was driven by growth in new work, which offset a small reduction in repair and maintenance work.

“Private commercial and public new housing, which increased by 2.5% and 8.4%, were big factors in the rise in new work. Less positive, was the fall in private new housing, which dropped 1.1%.

“More than anything, these figures reflect an underlying resilience in the sector – given that they cover a tumultuous political period at the end of 2019.

“Still, we’re not entirely out of the woods. The government has offered little in the way of detail on what the UK’s future relationship with the EU will look like, and stoked anxiety by ruling out any extension to the negotiations beyond December 2020.

“Until the sector can see what the future entails with our nearest trading partner, and key source of skilled labour, confidence and funding towards new projects is likely to be stymied.”

Arcadis build-to-rent market leader Will Waller said: “The residential sector saw its highest level of reported output in over 20 years, outperforming some other key sectors in 2019.  The build-to-rent sub-sector ‘hotspot’ was one key contributor, with home completions in this category increasing by around 50% in 2019.

“New residential orders were notably down in 2019 compared to the previous three years, a reflection of ‘peak uncertainty’ around Brexit undermining confidence.  That said, the first quarter of this year has heralded reinvigorated interest and activity from investors.  The build-to-rent sub-sector is one example where interest has continued to amplify in recent months with further growth this year anticipated.”

Naismiths director Gareth Belsham said: “For an industry which saw more businesses go to the wall than any other in 2019, the news that construction ended the year as the fastest-growing sector of the UK economy is cause for celebration.

“Growth of 0.5% over the quarter wouldn’t normally set the world alight. But construction’s solid performance offers more than just bragging rights over the UK’s services and manufacturing sectors – it’s also a vindication for an industry that was buffeted more than any other by Brexit uncertainty.

“True, the detail of the report is no unalloyed triumph. New residential building work fell by 1.1% during the quarter, and new orders for private sector housebuilders fell by 8.5%. Given Britain’s urgent need for thousands of new homes, such weak numbers are a worry.

“But the positives far outweigh the weaknesses. Most satisfying of all is the surge in all new orders – up 4.4% on the previous quarter. When you bear in mind that this figure scarcely captures the Boris bounce – which didn’t feed through until after the December election, things start to look even more rosy.

“With early indications from January looking strong, there’s a growing feeling that the industry is turning a corner, propelled by a new sense of optimism and possibility. If the Boris bounce is what powers the industry back to health in 2020, the foundations were laid in the final quarter of 2019.”

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