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Sun November 28 2021

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Quarterly construction output falls for the first time since Covid

11 Nov Official estimates indicate that construction output in Great Britain grew in September but after falls in the previous two months, quarterly output was down.

According to the Office for National Statistics (ONS), monthly construction output grew 1.3% in volume terms in September 2021, compared with August 2021.

This is the first monthly increase since June 2021 and the largest since March 2021, when output increased by 4.8%.

Despite the monthly growth, the 1.2% monthly decline in July and the 0.7% decline in August meant that quarterly construction growth fell 1.5% in the third quarter of 2021 compared with Q2.  After four successive increases in quarterly growth, this is the first quarterly fall since Q2 2020, when the arrival of the Covid-19 pandemic saw output dive.

Non-housing repair & maintenance was the largest contributor to the monthly increase, growing 2.6% (£67m). Public other new work and infrastructure new work also saw large increases in September 2021, of 7.2% (£50m) and 1.5% (£40m) respectively.

Public new housing and public housing repair & maintenance offset some of the monthly growth, seeing a monthly fall in September 2021 of 6.5% (£27m) and 2.7% (£17m), respectively. Anecdotal evidence gathered over the month suggests that the slowdown in public new housing was coming from the sharp increase in prices, the ONS said.

The level of construction output in September 2021 was 1.0% (£141m) below the level of February 2020, before the coronavirus pandemic; new work was 3.5% (£334m) below the February 2020 level, while repair & maintenance work was 3.9% (£194m) above the February 2020 level.

Quarter-on-quarter change in construction output

In contrast to the monthly growth, quarterly construction output fell 1.5% in Q3 (July to September) 2021, compared with Q2; both new work (0.3%) and repair & maintenance saw decreases (3.6%).

In contrast, infrastructure saw strong growth up 10.0% (£739m) in the three months to September 2021.

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Total construction new orders fell 9.2% (£1,221m) in Q3 2021, compared with Q2.

Inflation is also running high. The annual rate of construction output price growth was 5.1% in September 2021, which is the highest it has been since records began in 2014.

The annual rate of price growth in the 12 months to September 2021 was at its highest in new housing (7.5%) and private industrial new work (6.3%).

Evidence from the ONS  Business Insights and Conditions Survey (BICS) for October 2021 suggests that one on 10 construction companies were unable to source materials, goods or services needed from within the UK in the last month, while one in four had to change suppliers or find alternative solutions. The construction sector was the highest of any sector in reporting supplier issues.

Fraser Johns, finance director at construction contractor Beard, said: “The growth recorded in September is an encouraging sign. Following a concerning trend of declining output, this will hopefully mark a turning point for the construction industry. Recovering from the pandemic was never going to be plain sailing the whole way. Despite the positive signs in September, looking at the quarter as a whole, Q3 marked the first quarterly fall in output since Q2 2020.

“However, it appears client confidence is gradually returning in the market, as new work increased in September. As more clients are giving the green light to projects, it appears supply chain issues and price rises for raw materials will not be an insurmountable challenge.”

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