Eyebrows raised as construction output reaches record high

Latest numbers from the Office for National Statistics show that monthly construction output increased by 1.5% in volume terms in May 2022 to £15,053m, which is a new monthly high since records began in January 2010.

The increase in monthly construction output in May 2022 came solely from an increase in new work (2.8%) as repair & maintenance dipped 0.4% on the month.

At the sector level, the main contributors to May’s increase were private commercial new work and private new housing, up 12.1% and 7.2% respectively.

The level of construction output in May 2022 was 4.1% (£598m) above the February 2020 pre-coronavirus pandemic level; new work was slightly below (£3m) the February 2020 level, while repair &  maintenance work was above (£601m) the February 2020 level.

ONS reports that the post-covid recovery is mixed at a sector level, with infrastructure 19.0% above and private commercial 21.2% below their respective February 2020 levels in May 2022.

For the three months to May 2022, construction output increased by 3.0%, with increases seen in both new work, and repair and maintenance (2.4% and 4.1% respectively). This was the seventh consecutive growth in the three-month on three-month series, and the largest growth seen since June 2021.

Mark Robinson, chief executive at local authority procurement agency Scape, said: “A return to growth will come as a surprise to many across the industry, with the general consensus that inflation – which shows no sign of easing – is curbing longer term development plans.

“With the political picture facing significant change, fixing the economy has been put on the back burner just as the construction industry faces a critical peak season.

“All eyes will be on the economic plans of the leading Tory candidates. Any suggestion that austerity could return, in a bid to tackle the national debt, might cause concerns that a slowdown in public sector investment could compound the decline we’re starting to see in the private sector.

“The uncertainty over who will be the next prime minister also means there will be doubts over the direction of policy in areas such as housing and infrastructure, which will translate into some investors holding off on committing to longer term projects.”

Clive Docwra, managing director of construction consultant McBains, said: “These figures are a real tonic given continuing inflationary pressures, increases in the price of building materials and the Ukraine war, and suggest that the sector is finally emerging from its struggles as a result of the pandemic.

“The significant increases in private commercial new work and private new housing – 12% and 7% respectively – suggest a fresh wave of confidence is spreading among investors.

“But the figures also show that recovery since the decline at the start of the pandemic is mixed at sector levels.  Infrastructure contracts may be 19% above levels of February 2020, but private commercial work is still 21% below that period.”

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