february construction output
©Irstone.

February construction output has shown the first decrease in three months, following months of consecutive growth in the sector

Evidence received from the Monthly Business Survey for Construction and Allied Trades suggest that storms Dudley, Eunice, and Franklin that brought heavy rain between 16 and 21 February resulted in some projects being delayed, which contributed to the decline in the February construction output.

However, some businesses reported a positive impact as they picked up repair and maintenance work caused from storm damage.

Anecdotal evidence from returns received for both the Monthly Business Survey for Construction and Allied Trades and the Business Insights and Conditions Survey (BICS) suggested some of the issues in sourcing construction products remained.

High costs and shortages of materials, particularly for smaller sized firms, are still being reported.

Despite this, demand continued to be strong across the sector, as new orders grew by 9.2% in Q4, compared to Q3 2021. All sectors recovered to above their pre-Covid levels.

The 0.1% decrease in construction output in February 2022 represents a fall of £17m compared with January 2022. Out of nine sectors, six saw a monthly decrease in February 2022.

Infrastructure new work and non-housing repair and maintenance saw largest decrease

Infrastructure new work and non-housing repair and maintenance were the largest contributions to the monthly decrease, decreasing by 2.5% and 0.9% respectively.

Although infrastructure is the highest sector above its pre-coronavirus level, decrease in monthly growth in February 2022 in infrastructure new work is the sixth monthly decline out of the last seven months.

Public other new work, private housing new work and public housing repair and maintenance increased 10.5%, 0.5%, and 3.6% respectively. The increase in public other new work follows three consecutive monthly falls.

Price rises are having a noticeable impact on monthly output growth

Price rises are continuing to have a noticeable downward impact in volume terms for monthly output growth.

The February construction output shows that 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, which may partly explain the fall in the overall monthly construction output to negative 0.1% in February 2022.

Three-month on three-month construction output growth

Construction output rose 2.4% in the three months to February 2022, which is the strongest growth in the three-month on three-month series since June 2021. Increases in new work and repair and maintenance 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% and 4.4% respectively.

Public other new work and infrastructure new work were the only sectors to have seen falls, decreasing by 5.3% and 1.6%.

Industry comment

Fraser Johns, finance director at Beard commented: “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.”

Ukraine crisis and inflation are triggering nervousness in the construction sector

Clive Docwra, managing director of  McBains also stated: “Today’s statistics are a setback coming after a strong return in output over the last three months.

“Although Storms Eunice, Dudley and Franklin had an impact on work delays, more serious underlying concerns over factors such as energy price rises, disruption due to the Ukraine crisis and rising inflation are triggering nervousness both from investors and in the construction sector itself.

“One positive is that demand remains strong as new work overall increased slightly, but the government missed a huge opportunity last week to provide a boost to the industry by not introducing measures to improve home insultation in its energy strategy.  Not only would this have helped households with rising energy costs, but a programme of retrofitting work would provide support for smaller players should there be a noticeable downturn.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here