Product and labour shortages dampen output figures

The latest Office for National Statistics (ONS) report into the UK construction sector has revealed that output has fallen at its steepest rate since April 2020.

Product and labour shortages dampen output figures

Findings show that construction output fell 1.8% in volume terms in October 2021, this is the largest monthly decline since the first Covid lockdown when output fell by 41.7%.

New work fell (2.8%) from September to October 2021 while repair and maintenance remained unchanged (0.0%).

Like recent months, anecdotal evidence in October 2021 from businesses continues to suggest that product shortages caused by supply chain issues leading to subsequent price rises in raw materials such as steel, concrete, timber and glass, were an important reason for the decline.

At the sector level, the main contributors to the decline in monthly output in October 2021 were infrastructure and private new housing, which decreased 7.1% and 4.4% respectively; these decreases were partially offset by increases in private industrial and public other new work of 8.8% and 7.0% respectively.

In line with the monthly fall, construction output fell by 1.2% in the three months to October 2021; this was because of a 1.5% fall in repair and maintenance (mainly because of a 3.5% fall in non-housing repair and maintenance) and a fall of 1.0% in new work (with new housing (both public and private), public other new work, and private commercial new work all falling).

Mark Robinson, group chief executive at SCAPE, warned that declining output will add to the worries that contractors have around increasing inflation and the new wave of Omicron cases.

He said: “October witnessed the peak of the fuel crisis, port delays and a shortage of HGV drivers. The impact these have had on existing supply challenges, combined with ongoing labour shortages, mean that it’s no surprise that output has taken a knock.

A potential new wave of Omicron cases and the introduction of restrictions to curb it – on top of ongoing concerns around inflation – mean that 2022 is also likely to be characterised by challenges. Allowed to go unchecked, these developments will only exacerbate existing labour and supply shortages, which will significantly dampen the sector’s ability to pursue further growth and continue supporting the UK’s economic recovery.”

Some firms were more bullish in their assessment.

Allan Callaghan, managing director of Cruden Building, said: “While the latest construction output figures have declined this month, we are beginning to see some green shoots of recovery in the sector. This is largely due to many significant construction projects nearing completion so it’s important that the industry maintains this momentum with a strong pipeline of new building projects to help with the ongoing recovery into next year. At Cruden, we have secured a healthy construction pipeline for 2022, particularly as we are included in a number of important procurement frameworks coupled with a robust housing market across central Scotland.

“Logistical difficulties, arising from material and labour shortages, remain prevalent throughout the sector. That’s why we are putting our continued focus and investment in our apprentices and the lifelong development of employees through our Cruden Academy in order to help mitigate against the impact of these industry challenges.”

MJ O’Shaughnessy, managing director, Will Rudd Davidson Glasgow and Ireland, said: “We had been hopeful that we would see an increase in output for the period, in part, because these figures do not reflect our experience over the last few months with our expansion into Ireland and new project wins throughout the UK in the residential, hotel/leisure and energy and renewables sectors. However, many firms continue to reckon with COVID-related staff shortages and the resulting periods of self-isolation. Further still, supply-chain issues will be having a negative impact on the pace at which some firms can deliver projects.

“Will Rudd, like all businesses in the construction industry, is looking ahead to 2022, hopeful that the sectors will return to pre-pandemic levels of growth. Additionally, as we work towards meeting ambitious net-zero carbon targets, we must consider how our engineering work can best protect, preserve and enhance our landscapes and environments in a sustainable way.”

Mark Markey, managing director of the Akela Group, added: “It’s disappointing to see construction output fall again this month as the industry continues to face a number of challenges, including the high cost of materials, supply chain issues and the chronic shortage of skills.

“At Akela Group, we are continuing to expand into new markets and this has presented new opportunities for the group - including our first electric vehicle (EV) project at the UK’s most powerful EV charging hub in Oxford. To meet this growing demand, we have invested in creating a talent and skills pipeline within the group, recruiting 30 modern apprentices this year. Recruiting young talent and upskilling the existing workforce with essential green skills will undoubtedly play a key role in ensuring a bright future for the sector.”

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