ONS: Construction output maintains upward trajectory
Monthly output in the UK’s construction industry increased by 1.1% in volume terms in January 2022 to reach its highest level since September 2019, new figures from the Office for National Statistics (ONS) have revealed.
Driven solely from an increase in repair and maintenance (4.6%) as new work saw a slight decrease of 0.8% on the month, the rise follows an increase of 2.0% in December 2021 and is the third consecutive monthly growth greater than 1.0%.
At the sector level, the main contributors to growth in January 2022 were private housing repair and maintenance and non-housing repair and maintenance, which grew by 5.0% and 5.5%, respectively.
The level of construction output in January 2022 was 1.4% (£197 million) above the February 2020 pre-coronavirus (COVID-19) pandemic level. New work was 2.8% (£267 million) below the February 2020 level, while repair and maintenance work was 9.3% (£464 million) above the February 2020 level.
The recovery to date (since the falls at the start of the coronavirus pandemic) is mixed at a sector level, with infrastructure 37.9% (£709 million) above and private commercial 27.8% (£693 million) below their respective February 2020 levels in January 2022.
Alongside the monthly increase, construction output rose 3.0% in the three months to January 2022; this is the strongest growth in the three-month on three-month series since June 2021 (3.4%), with increases seen in both new work and repair and maintenance (4.0% and 1.4%, respectively).
Mark Markey, MD of Glasgow-headquartered Akela Group, said the figures are “good news for everyone working in the industry” and reflective of what the firm is experiencing.
“PMI data released last month also echoed this confidence, highlighting that housebuilding has become the best performing construction work category and the latest increase in residential work was the strongest for eight months,” he added. “This chimes with the continued demand for our ground engineering and civil engineering services which has seen us win contracts across Scotland with major housebuilders to deliver more than 2100 units.
“We are also seeing demand for services in other sectors including retail and energy, specifically electric vehicle charging stations. Our new hub in Leeds will support this growing demand across the north of England. Of course, there remains industry-wide challenges such as widespread material and labour shortages, coupled with rising costs. Our hope for the coming months is that this demand for house building and civil engineering continues and leads to even stronger client confidence.”
Mark Robinson, chief executive of construction procurement agency Scape, said: “The construction industry has started the year on a positive footing, maintaining the momentum generated in 2021 despite ongoing labour and materials shortages.
“But the sector’s resolve is likely to be tested further by the effects of the war in Ukraine on energy prices and the supply chain. Oil prices have hit a 14-year high and look set to continue increasing, while persistent challenges around timber and steel will only intensify.
“The inflationary pressures created here in the UK will be difficult to manage, particularly for SMEs that may be tied into fixed-prices contracts. It’s here where major contractors need to support their supply chain with constant dialogue and a pragmatic approach to fair payment, and ultimately demonstrate the resilience that’s put the sector at the forefront of recent economic growth.”
Clive Docwra, managing director of construction consultant McBains, added: “This third successive monthly rise in growth greater than one per cent shows the construction sector is emerging with resilience from the post-Covid downturn. However, growth is being driven by repair and maintenance work rather than an increase in new contracts, suggesting that investment in new projects is still sluggish in some areas, particularly private commercial work.
“The outlook for the immediate future is also much less rosy – energy price rises will soon bite, plus the war in Ukraine will ramp up these costs further, and the conflict will also have an impact on supply and price of many materials used on UK building projects. Both factors will exacerbate inflationary pressures, which could derail any longer-term recovery.
“It all means construction needs a helping hand, and the chancellor, in his spring statement later this month, could pause the planned national insurance rise to give business some breathing space.”