Construction output continues to reverse lockdown decline

Output in the UK construction sector grew by 17.6% in July 2020 as the industry continued its coronavirus recovery.

Construction output continues to reverse lockdown decline

The latest data from the Office for National Statistics (ONS) revealed a third consecutive month of growth since the record monthly decline of 40.2% in April 2020, with then record monthly growth of 7.6% in May 2020 followed by record monthly growth of 23.5% in June 2020. 

However, the collapse in activity during the early stages of the pandemic meant that construction output in July was still 11.6% behind the February 2020 level.

In the three months to July 2020, construction output fell by 10.6%, compared with the previous three-month period, to £3,591m. This was driven by falls in both new work (9.7%) and repair and maintenance (12.4%).

The decrease in new work (9.7%) in the three months to July 2020 was because of falls in every new work sector, apart from infrastructure, which grew by 6.0%; the largest negative contributor was private new housing, which fell by 17.0%.

Allan Callaghan, managing director of Cruden Building, part of the Cruden Group, said: “It’s welcome news that monthly construction output has continued to climb, however, the industry has a lot of work to do to plug the productivity gap due to COVID restrictions. Encouragingly, at Cruden, we are seeing a surge in demand for new homes and have secured a robust forward order book to help address the country’s chronic undersupply of housing across all tenures.

“Key to meeting this pent-up demand will be developing a pipeline of skills and talent within the business. We have recently started ten new modern apprentices on a four-year programme and they will become part of the 75-strong team of apprentices through our Cruden Academy. Apprentices are the lifeblood of the industry and they will play a crucial role in helping this resilient sector to dust itself off and rebuild its future.”

Clive Docwra, managing director of construction consultant McBains, said: “Today’s figures will be welcomed by the construction sector as a sign of its continuing recovery, but in reality they need to be viewed in the context of an industry that experienced a record 40% drop in output at the height of the lockdown.

“Construction is still a long way from being out of the woods and the upturn is extremely fragile, reflected by the fact the figures show that new work decreased by 9.7% in the three months to July 2020, with private new housing work alone falling by 17.0%.

“The big concern for the industry is if there’s a second spike and a further lockdown. The government needs to do all it can to ensure the sector maintains its recovery.

“On top of this, of course, a potential no deal at the end of the Brexit transition period is making investors nervous about committing to new projects. The Prime Minister may want the industry to ‘build, build, build’ but that’s difficult when many investors are saying ‘wait, wait, wait’ and holding off embarking on new developments until there’s greater clarity.”

Fraser Johns, finance director at Beard, added: “In a sense there was really only one way these figures could go starting from such a low base back at the start of Q2, when we saw a 40.2% drop in GDP. But continued growth at this rate for the third consecutive month has to be a good thing.

“However it is interesting to note that across the sectors, and therefore the economy as a whole, the rate of recovery is not as strong as it was in June with construction growing at 17.6% compared to 23.6% previously. This is likely to be down to a number of factors but would reflect what we’re seeing on the ground.

“We face a challenging 12 months ahead based on continued uncertainty in the economy, and the affect this is having on getting project decisions over the line.

“So while it’s welcome to see overall GDP grow by 6.6%, a return back to pre-pandemic levels simply cannot come quickly enough.”

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