Construction output suffers largest monthly fall since records began

Output in the UK construction sector fell by 40.1% in April compared to the month before, according to Office for National Statistics (ONS) data.

Construction output suffers largest monthly fall since records began

The fall was driven by a 41.2% decrease in new work and a 38.1% decrease in repair and maintenance, all of which were the largest monthly falls on record since the monthly records began in January 2010.

The decrease in new work (41.2%) in April 2020 was because of record month-on-month falls in all new work sectors; private new housing and private commercial were the largest contributors, falling by 59.2% and 39.7% respectively.

The decrease in repair and maintenance (38.1%) in April 2020 was because of record month-on-month falls in all repair and maintenance sectors; the largest contributor was private housing repair and maintenance which declined by 54.3%.

Construction output fell by record 18.2% in the three months to April 2020, compared with the previous three-month period; this was driven by a 19.4% fall in new work and a 15.8% fall in repair and maintenance.

Data for April 2020 was collected by online questionnaire for the first time rather than by paper questionnaire as previously; anecdotal evidence received from extensive contributor comments and the Business Impact of Coronavirus Survey (BICS) noted that the coronavirus pandemic drove the large falls in construction output in April 2020. 

The Federation of Master Builders (FMB) called for the removal of barriers to small house builders, to ensure that the market can make a resilient recovery over the next six months.

Brian Berry, chief executive of the FMB, said: “Construction output has plummeted during the lockdown. Restrictions on the housing market lead to a significant drop in private new housing in April. The fact that 1 in 3 small to medium-sized (SME) house builders left the sector in 2008 demonstrates the acute need to support them over the next six months.

“Having a housing sector which includes an army of SME builders will help to ensure it is more resilient, diverse and of a high quality as we reshape and re-imagine the sector. We must do this in order to build the homes we need as the country recovers from the coronavirus.

“The government must look at how they can ease the structural barriers that SMEs face when it comes to bringing forward new homes. The FMB is calling for a more manageable planning system, and greater availability of affordable land for small scale development. These are two areas which could make all the difference in terms of having a more sustainable housing market.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, said: “The construction sector’s famous volatility has long given it an unwanted reputation for boom and bust.

“But even the thickest skins have been pierced by the simultaneous collapse in demand and output unleased on the sector by the COVID crisis.

“Conventional construction techniques do not lend themselves to remote working or social distancing, and the closure of sites brought most work to a screeching halt in April.

“Even though the UK Government eased lockdown restrictions on the sector much earlier than it did on other parts of the economy, the damage was already done.

“At over 40%, construction’s month-on-month fall in output was more than double that seen in the services sector in April. Not all parts of the economy suffered equally.

“Fortunately April’s brutal milestone may yet be the high-water mark for construction’s pain. With sites now reopened and work resuming, albeit under strict social distancing rules, the speed of decline is easing.

“But if April saw the moment of impact, the coming months will see the whiplash effect. Damaged business confidence and shrivelling levels of investment will continue to shake the construction industry for many months to come. The road to recovery will be long and fraught.”

Clive Docwra, managing director of construction consulting and design agency McBains, said: “Today’s figures are further confirmation that the construction sector will face a hugely tough time to recover from the coronavirus pandemic.

“Particular concerns are private new housing work seeing a third consecutive month of large decline, exacerbated by the COVID-19 lockdown on April and now at its lowest level for a decade – bad news for the industry but also for prospective homeowners given the housing shortage. The record fall in private commercial new work also reflects the pause button being pressed on major projects.

“Hopefully today’s figures will represent the nadir given they cover the full month of lockdown, but while many large construction firms are now resuming work, many will still weakened by reduced order pipelines over the next few months.

“Firms are also experiencing labour shortages, supply chains are still operating extremely slowly and cashflow is becoming an increasingly pressing issue as cash reserves dry up. The government needs to stimulate demand, for example through reducing VAT on repair and maintenance work.”

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