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The Office for National Statistics (ONS) estimates that monthly construction output decreased 1.9% in volume terms in February 2024 to £15,229m.
This follows a 1.1% increase in January 2024.
The decrease in monthly output came from decreases in both new work (a 2.3% fall), and repair & maintenance (a 1.4% fall). Anecdotal evidence from survey returns suggested effects of heavy rainfall led to delays in planned work.
At the sector level, eight out of the nine sectors saw a fall in February 2024, with the main contributors to the monthly decrease seen in non-housing repair & maintenance, and private commercial new work, which decreased 2.5% and 4.0%, respectively. The only sector to see ab increase was private housing repair & maintenance, which grew by 0.2%.
Across three months to February 2024, construction output in Great Britain is estimated to have decreased by 1.0% – with new work falling 3.0% but repair & maintenance increasing by 1.6%.
While this seems like gloomy news, February was two months ago now. More recent surveys suggest the industry has turned a corner. The Construction Purchasing Managers’ Index (PMI) for March indicated a growth in output in March, for the first time since last August, albeit at a very modest rate. But that March growth might just have been catching up on worked that was washed out in February rather than actual market growth.
Whatever the true picture is, insolvency practitioners are still expecting plenty of business from the construction sector. Allan Kelly, restructuring advisory partner at FRP, said: “February’s data outlines the construction industry’s uncertain state, having posted growth at the very start of the year. Overall output is heavily linked to the housebuilding sector, which has been subdued by high interest rates for more than 18 months now and continues to act as a drag on performance.
“With the base rate forecast to fall in the coming months, inflation dropping – both of which should help put money back into people’s pockets – and the government having recently published its long-awaited guidance on second stairways in tall buildings, contractors will be hopeful of a resi-led recovery through the course of the summer.
“Insolvency levels are likely to remain high for the foreseeable future though. Trade credit terms have become tougher due to recent collapses, while the winter’s poor weather has held up projects and put a strain on cashflow. This at a time when the cost of doing business remains elevated and firms continue to work through the effects of previous inflation on contracts. 13-week rolling cashflow forecasts should very much remain the tool of choice for management teams trying to manage order books effectively.”
Scott Motley, head of programme, project and cost management at construction consultant Aecom, said: “The construction industry will be dismayed that output has slipped back into decline, as firms struggle to gather momentum in a sector that hasn’t notched up consecutive months of growth since 2022.
“Longer term prospects are improving though, with the Bank of England poised to begin cutting rates – boosting development activity as we enter the warmer months that are the most fruitful for contractors.
“However, firms will still need to be alert to persistent challenges – namely elevated labour costs and an increasingly competitive tender market – which are hampering contract delivery while squeezing margins.”
Beard finance director Fraser Johns was altogether more upbeat, saying: “After January’s increase in construction output bucked the trend of the previous three consecutive monthly falls, it would be tempting to think that February’s figures are a damp squib. However, it is evident from the ONS and our experience that poor weather had a lot to do with it, with heavy rainfall leading to delays in planned work and decreasing output in February.
“While there are ongoing pressures on the industry, including some remaining uncertainty around inflation, we shouldn’t let these latest figures shadow a brighter outlook and we shouldn’t let this small decline in output dampen the growing optimism we’re seeing on the ground.”
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