Construction output has fallen below pre-Covid levels for the first time in months, as the real long-term impact of Covid-19 starts to hit home
Construction output fell by 1.6% in volume terms in July 2021, with the level of output now below its pre-coronavirus pandemic February 2020 level, according to the latest ONS stats.
New work, and repair and maintenance both contributed to the monthly decline in July 2021, with anecdotal evidence from businesses suggesting that price increases and product shortages caused by supply chain issues were the main reasons for the decrease.
The level of construction output in July 2021 was 1.8% below the February 2020 pre-pandemic level; while new work was 3.2% below the February 2020 level, repair and maintenance work was 0.6% above the February 2020 level.
The recovery to date is mixed at a sector level, with infrastructure the best performing sector over the pandemic at 35.7% above its February 2020 level and private commercial the worst-performing sector over the pandemic at 20.3% below its February 2020 levels in July 2021.
Monthly construction output fell by 1.6% in volume terms in July 2021 because of declines in both new work and repair and maintenance.
The decline in monthly output in volume terms in July 2021 came mainly from private housing, which saw falls in both new work, and repair and maintenance of 7.5% and 6.2% respectively.
Alongside the monthly fall, construction output fell by 0.6% in volume terms in the three months to July 2021, the first three-monthly fall since February 2021, driven by a fall in repair and maintenance of 2.9%.
‘A real concern for future growth’
Commenting on the ONS’ UK construction output figures, Fraser Johns, finance director at Beard, said: “With the ONS figures putting output below pre-covid levels for the first time in months, we are seeing the real long-term impact of the pandemic start to hit home.
“The supply chain issues and price rises which stem from the slowdown in production globally, and friction at the borders due to Brexit, have knocked customer confidence as the figures suggest a decline in new work for July of 1.1%. This is a real concern in terms of future growth.
“As an industry we have been warning that the main threat to recovery would be supply chain issues and price rises since the start of the year.
“Firms will price a job now at one level only for that to rise significantly by the time they’re ordering materials.
“Contractors have to be proactive about this issue in terms of working closely with customers and consultants, ensuring they understand fully the implications of the delays and price rises, as well as maintaining strong relations with suppliers.
“By assessing the situation on a daily basis and introducing multi-step procurement processes in order to absorb the extended lead-in times for certain materials, we can mitigate the risk of disruption to projects on the ground.
“But the reality is, we’re looking at a tough winter ahead especially if further waves of covid impact production further.”
‘Continuing to struggle to bounce back’
Clive Docwra, managing director of McBains, commented: “This, the fourth monthly fall in output and the first to show a return to pre-pandemic levels, proves that the sector is continuing to struggle to bounce back from the pandemic.
“New work in particular is drying up, with new contracts down more than 3% compared to February 2020, with private commercial work in particular down over 20%.
“This is not a reflection of confidence in the market, but because of a continuing shortage of materials – especially imported timber which has seen price rises of more than 60% over the last year – in conjunction with shortages in other materials and skilled labour resources.
”Price rises are already evident in recent tender returns which in turn could fuel wider inflationary pressures. Private housing and repair and maintenance have been responsible for leading a rise in output in recent months, but these sectors in particular require a lot of timber, and this is reflected by the £217m decline in private housing new work, and £110m fall in repair and maintenance work.
“Skills shortages are also biting hard, particularly in bricklaying, which is hampering work expansion so, as the CBI has said, adding bricklayers to the shortage occupation list will provide respite.”