New order figures offer hope for stronger growth ahead

Monthly construction output increased by 2.0% in volume terms in December 2021, according to the latest bulletin from the Office for National Statistics.

However the ONS has revised its earlier estimate for November’s construction output growth, from a solid 3.5% previously to 1.9% now. So with a 1.5% month-on-month contraction in October, quarterly growth was just 1% up on the third quarter.

The 1% rise in Q4 was not enough to counter the 1.4% fall seen in Q3 (Sept to July) 2021.

For 2021 as a whole, annual construction output increased by a record 12.7% compared with 2020. But 2020 saw the industry put into near total lockdown for several weeks in the spring. It was the year that the Covid-19 pandemic had the greatest economic impact, resulting in a record 14.9% fall in construction output.

A 12.7% rise after a 14.9% fall is a significant net fall of 4.2% over the two-year period.

The 2% monthly rise in construction output in December 2021 came solely from an increase in new work (3.5%) as repair and maintenance saw a decline of 0.7% on the month.

The level of construction output in December 2021 was 0.3% above the February 2020 pre-coronavirus pandemic level; new work was 2.0% below the February 2020 level, while repair and maintenance work was 4.5% above the February 2020 level.

While the output numbers might not yet be too exciting, the order books appear to be filling up, giving grounds for optimism.

Total construction new orders increased by 9.2% (£1,121m) in Q4 2021 compared with Q3 2021. Total new orders are now at their highest level (£13,326m) since Q3 2017, which was stilted by large value orders for HS2 main works contracts.

Fraser Johns, finance director at building contractor Beard, certainly seems optimisitic. “The increase in construction output in December was driven by new work,” he said. “With clients green lighting projects in greater numbers, this suggests confidence is growing and the start of 2022 looks bright.”

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