Adverse weather took its toll on construction output in February; however, observers suggest that the long-term outlook is positive.
Monthly construction output decreased by 0.1% to £14,610 million in volume terms in February 2022 compared with January 2022, according to the latest ONS statistics. This is the first monthly decrease since October 2021 (a fall of 0.9%) following three consecutive months of growth.
Storms Dudley, Eunice and Franklin bought heavy rain across much of Great Britain between 16 to 21 February 2022, as detailed in the Met Office’s February 2022 release. For the construction industry this caused delays and some projects to be suspended. This was because more working days were lost on sites and premises than normal for this time of the year.
Fraser Johns, finance director, Beard said: “The February statistics need to be looked at in context. When looking back at a slightly longer-term view, a more positive picture emerges. In the three months to February, construction output grew at its strongest since the summer of 2021.
“The sector has also recovered to the point where output is now above pre-pandemic levels. With the current challenges in the industry, this is an impressive achievement that demonstrates the resilience of the sector.
“The road to recovery is always going to have some bumps along the way, however there were positive signs in February. New orders increased slightly which is a good measure of customer confidence.
“To continue to build on this positive momentum, the sector will need to overcome some hurdles. The skills shortage is still an issue to overcome, and firms should look at hiring practices to improve diversity in the sector.
“Supply chain difficulties are still present and positive supplier relations are crucial to keep the momentum going. At Beard we work closely with our suppliers, ensuring we have constant dialogue to avoid get ahead of potential issues and we pay suppliers promptly to help them avoid cashflow issues.”
Anecdotal evidence from returns received for both the ONS’ Monthly Business Survey for Construction and Allied Trades and its Business Insights and Conditions Survey (BICS) suggested some of the issues in sourcing construction products remained. High costs and shortages of materials, particularly for the smaller sized firms, are still mentioned.
Despite these challenges, demand continued to be strong. New orders in the construction industry grew by 9.2% in Quarter 4 (Oct to Dec) 2021 compared with Quarter 3 (July to Sept) 2021. All sectors recovered to above their pre-coronavirus (COVID-19) level.
The 0.1% decrease in construction output in February 2022 represents a fall of £17 million compared with January 2022. Six out of the nine sectors saw a monthly decrease in February 2022.
In February 2022, 72% of construction businesses reported they were able to source materials, goods or services needed from within the UK. Of this, 27% reported changing supplier or finding alternative solutions. This is a small decrease compared with January 2022. It may partly explain the fall in the overall monthly construction output to negative 0.1% in February 2022.
Construction output rose 2.4% (£1,004 million) in the three months to February 2022. This is the strongest growth in the three-month on three-month series since June 2021 (4.0%). Increases in new work (2.2%) and repair and maintenance (2.6%) contributed to the growth, with seven out of the nine sectors seeing an increase.
Private housing new work, and non-housing repair and maintenance were the largest contributions to the rise. They increased by 5.1% (£470 million) and 4.4% (£346 million) respectively.
Public other new work and infrastructure new work were the only sectors to have seen falls, decreasing by 5.3% (£126 million) and 1.6% (£117 million).
Stuart Law, CEO of the Assetz Group, said: “Monthly output figures always fluctuate, especially over the winter and into spring when the weather has a much bigger impact on construction projects. Looking over a slightly longer timescale, its promising for the housebuilding sector that output is above pre-covid levels, and that the figures are trending in the right direction over the three-monthly series, which offers more a of a robust guide to market trends than month on month comparisons. We would expect to see further growth in next month’s figures as March will have been the first full month in which the industry has been able to operate without legal coronavirus restrictions since the start of the Pandemic.
“While we welcome all green shoots of growth, output remains muted, especially if we consider the figures against demand for new homes and the full potential of the market.
“Despite the expectation of some growth over coming months, the same structural issues persist, continuing to limit construction output and housing supply. The impact of Brexit, the pandemic, and now the war in Ukraine, continue to hamper supply chains, making labour and materials harder to source and far more expensive. At the same time soaring fuel prices, the price of land, and the costs associated with the UK’s complex, time-consuming planning system, are all long-term problems that, unless tackled, will prevent the market from reaching its potential.
“As is always the case, these factors disproportionately impact SMEs, which do not have access to the kind of capital needed to push through significant short-term financial challenges and struggle to secure funding from the big banks. While we cannot control the turbulent global security and socioeconomic climate, we can tackle structural issues with our domestic market, like progressing planning reform as a matter or urgency, and supporting a broad range of innovative funding solutions for housebuilders so they can ride out current economic challenges.”
