Construction sector ‘cautious’ on increased output with further uncertainty on horizon
News of a “breathtaking” acceleration in construction sector output has been tempered by concerns over the impact of poor weather, post-Brexit uncertainty and risks associated with the COVID-19 virus.
New figures released by the Office for National Statistics (ONS) today revealed a 1.4% increase in output in the three months to January 2020 compared with the previous three-month period.
The rise was driven by 2.4% growth in new work but offset by a 0.6% fall in repair and maintenance. The rise in new work in the three months to January 2020 was because of growth in all sectors, with the largest positive contributions coming from private housing, private commercial and infrastructure, which increased by 2.4%, 2.1% and 1.7% respectively.
In repair and maintenance, the fall in the three months to January 2020 was because of a fall in private housing, which decreased by 5.6%; in comparison public housing repair and maintenance, and non-housing repair and maintenance increased by 2.0% and 2.4% respectively.
Construction output decreased by 0.8% in the month-on-month all work series in January 2020. This was driven by a 2.4% fall in repair and maintenance as new work saw flat growth (0.0%).
Allan Callaghan, MD of Cruden Building, part of the Cruden Group, said: “It’s encouraging to see a return to construction output growth and this is reflected in our own strong performance, where the group has set ambitious targets to further expand our activities and boost housing delivery by 25% this year. Most recently, Cruden Building has been awarded two significant contracts with housing association, Sanctuary Scotland.
“However, in order to grow sustainably and future-proof the business, we need to continue to attract new talent into the industry. Initiatives such as last week’s Scottish Apprenticeship Week are vital to shine a spotlight on the sector and educate more young people on the diverse range of roles available. We will continue to invest heavily in our Cruden Academy, which includes our much-admired modern apprenticeship programme, managing over 60 apprentices across the group’s workforce. Equally, our emphasis on providing lifelong learning and training to our employees remains key to our continued success.
“On a cautionary note there is little doubt that the weather in the shape of the excessive rainfall may impact on output from the first quarter and the as yet unknown impact of the control of the Covid19 virus combined with the post-Brexit uncertainty are all factors which need micro and macro managed to maintain output.”
Clive Docwra, MD of construction consulting and design agency McBains, said: “The construction sector will give a cautious welcome to these figures, in particular positive growth in private housing, private commercial and infrastructure work.
“Underlying long-term growth is still fragile however, with the figures showing volatile patterns over previous months, and the industry will be looking with interest at the Chancellor’s budget later today for any announcements that will give the sector a much-needed boost.
“Clarity on growth over the next few months is doubly important as the impact of coronavirus is an unknown quantity. If workers have to self-isolate, this will trigger a dip in activity, and if financial market values continue to fall then this will also have an impact on investors’ capacity to commit to new projects.”
Gareth Belsham, director of the national property consultancy and surveyors Naismiths, added: “The Boris bounce lives on in construction, if nowhere else, and is keeping the wider economy in the black - just.
“The acceleration in construction sector output has been breathtaking. In the space of a month, it tripled from a respectable 0.5% in the final quarter of 2019 to 1.4% in the three months to the end of January.
“After being buffeted by Brexit uncertainty for much of 2019, a sprint finish saw construction close the year as the fastest-growing sector of the UK economy. We began 2020 in afterburner territory, with developers rushing to restart and re-energise mothballed projects.
“Private sector housebuilding has rocketed back to the top spot, with new work growing by 2.4%
“With total output now ticking along at 3.1% more than it was at this point in 2019, the official data confirms the surge in sentiment we’ve seen on the front line.
“But for all its momentum, this anachronistic data risks being a pre-coronavirus high water mark.
“There’s a danger that the industry’s great strides could soon be tripped up by interruptions to its delicate supply chain or restrictions on labour-hungry contractors’ ability to get the people they need on site.”