Construction output keeps rising despite slow-down in new work

January’s 1.1% rise in construction output to £14,676m follows an increase of 2.0% in December 2021. It is the third consecutive monthly growth greater than 1.0%.

The January increase in output came solely from repair & maintenance (up 4.6%) as new work saw a slight decrease of 0.8% on the month.

Alongside the monthly increase, construction output rose 3.0% in the three months to January 2022. This is the strongest growth in the three-month on three-month series since June 2021 (3.4%), with increases seen in both new work (4.0%) and repair & maintenance (1.4%).

The level of construction output in January 2022 was 1.4% (£197m) above the February 2020 pre-coronavirus pandemic level. New work was 2.8% (£267m) below the February 2020 level, while repair and maintenance work was 9.3% (£464m) above the February 2020 level.

The Office for National Statistics said that anecdotal evidence suggested some of the issues in sourcing construction products in the latter half of 2021 had continued to ease. Along with the easing of supply chain constraints, new construction orders grew by 9.2% in the fourth quarter of 2021 compared with Q3.

Mark Robinson, chief executive of construction procurement agency Scape, said: “The construction industry has started the year on a positive footing, maintaining the momentum generated in 2021 despite ongoing labour and materials shortages.

“But the sector’s resolve is likely to be tested further by the effects of the war in Ukraine on energy prices and the supply chain. Oil prices have hit a 14-year high and look set to continue increasing, while persistent challenges around timber and steel will only intensify.

“The inflationary pressures created here in the UK will be difficult to manage, particularly for SMEs that may be tied into fixed-prices contracts. It’s here where major contractors need to support their supply chain with constant dialogue and a pragmatic approach to fair payment, and ultimately demonstrate the resilience that’s put the sector at the forefront of recent economic growth.”

Clive Docwra, managing director of construction consultant McBains, said: “This third successive monthly rise in growth greater than one per cent shows the construction sector is emerging with resilience from the post-Covid downturn. However, growth is being driven by repair and maintenance work rather than an increase in new contracts, suggesting that investment in new projects is still sluggish in some areas, particularly private commercial work.

“The outlook for the immediate future is also much less rosy – energy price rises will soon bite, plus the war in Ukraine will ramp up these costs further, and the conflict will also have an impact on supply and price of many materials used on UK building projects.  Both factors will exacerbate inflationary pressures, which could derail any longer-term recovery.

“It all means construction needs a helping hand, and the chancellor, in his spring statement later this month, could pause the planned national insurance rise to give business some breathing space.”

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