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Weather blamed for construction output fall

12 Sep 22 Another month of declining construction output and the Office for National Statistics is again suggesting that factors beyond government control could be to blame.

Was there too much sun to get any work done?
Was there too much sun to get any work done?

Monthly construction output decreased 0.8% in July 2022, or £114m, compared with June 2022.

This follows the 1.4% decrease in June 2022. This is the second consecutive decrease in monthly construction output, following seven consecutive months of growth in the sector between November 2021 and May 2022.

Last month the Office for National Statistics (ONS) said that June’s numbers were affected by the timing of the royal jubilee bank holiday, creating two fewer working days than in May. [See our previous report here.]

July’s decline in construction output was partly blamed on the weather being too good. The ONS said “The warm weather experienced in July 2022… saw a number of amber and red weather warnings and record-breaking temperatures across much of the country. For the construction industry, working days were lost during this time… Businesses reported that it was too hot to work because of the extreme weather conditions and record-breaking temperatures particularly seen around 18th and 19th July.”

Anecdotal evidence received from returns for the Monthly Business Survey for Construction and Allied Trades (MBS) and the Business Insights and Conditions Survey (BICS) also suggests rising prices are acting as a brake on orders.

The decrease in monthly construction output in July 2022 came solely from a decrease in repair and maintenance (2.6%) as new work saw a slight increase (0.3%) on the month.

Public sector new house-building work decrease 13.1%, however – the biggest decline of any subsector.

The level of construction output in July 2022 was 2.1% (£300m) above the February 2020 pre-coronavirus pandemic level; new work was below at 1.9% its February 2020 level, while repair and maintenance work was 9.7% above the February 2020 level.

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The impact of price rises in the construction industry in 2022 continues to see the gap widen between the value and volume of construction output, as shown in the graph below.

All construction work monthly index, Jan 2019 to July 2022, current price (value) and chained volume measure (volume), seasonally adjusted, Great Britain
All construction work monthly index, Jan 2019 to July 2022, current price (value) and chained volume measure (volume), seasonally adjusted, Great Britain

Clive Docwra, managing director of property and construction consultant McBains, said the fall in output was about more than just too much sunshine. “July’s decrease in output in part reflects falling demand because of increasing cost of living pressures, and uncertainty over the UK economic policy given the contest over who would become the next prime minister,” he said.

“It has meant many clients – from households considering low-scale home improvements to investors and developers contemplating major new projects – held off committing investment.

“Supply bottlenecks are also continuing to impact, especially with materials coming from China being affected by the partial or full lockdowns in dozens of Chinese cities. 

“The effect of Russia’s invasion of Ukraine is also starting to bite harder.  Many construction firms were protected from the increases in energy and material prices because they used forward contracts for energy and to pre-purchase materials and products where possible, but that has merely delayed pressures that are now being felt more intensely.

“To ease the energy crisis, the construction sector would have liked to see the Truss administration support a major home insulation programme, which would not only help fix Britain’s leaky and energy-inefficient homes and help cut bills, but also provide work for smaller construction firms who are in particular feeling the pinch at present.”

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