Construction Output Sees Healthy Growth in Q3 2024

CONSTRUCTION OUTPUT is estimated to have increased by 0.8% or £444m in the three months from July to September in 2024 (Q3), compared with the previous three months.

The latest Office for National Statistics figures show the quarterly increase for Q3 came solely from a rise in new work of 2%, as repair and maintenance fell by 0.6%. August’s monthly growth figure was revised to 0.6%, while July’s output fell by 0.4%.

Construction was the biggest contributor to GDP growth in the economy for Q3 of 0.1%.

Construction Output in September 2024

Monthly construction output is estimated to have grown by 0.1% in volume (£15m in value) during September 2024. The monthly increase came solely from a rise in repair and maintenance of 0.4% as new work fell by 0.2%.

At the sector level, four out of the nine sectors grew in September 2024. The main contributor to the monthly increase was private housing repair and maintenance, which grew by 1.3%.

Total construction new orders fell 22.0% (£2,722 million) in Q3 2024 compared with Quarter 2 2024. This quarterly decrease in new orders came mainly from private new housing and private commercial new work, which fell 31.3% (£861 million) and 20.8% (£786 million), respectively. Q3 2024 showed the lowest level of total construction new orders (£9,673m) since Q4 2023 when the level was £9,126m.

Q3’s fall comes after an increase of 16% in Q2 2024, compared to Q1 2024.

The annual rate of construction output price growth was 2.0% in the 12 months to September 2024.

INDUSTRY RESPONSES

Brian Berry, Chief Executive of the Federation of Master Builders

Not Out of the Woods

Brian Berry, Chief Executive of the FMB said: “The positive growth in the construction sector of 0.8% in the third quarter of 2024 is a welcome signal that the construction industry is starting to show signs of recovery, after what has been a difficult few years. The 2% growth in new work on Q2, is indicative of growing market confidence.

“However, the 0.6% fall in repair and maintenance shows the building industry is not out of the woods yet, and with the economy barely growing this could represent consumers being careful with their spending. New orders on housing are particularly worrying, given their significant fall over the quarter, this is despite the Government’s efforts to build 1.5 million homes.”

“The new Government has made early announcements that they are prioritising housebuilding, with new targets set, and significant planning reforms announced. The Q3 data released today suggests the construction industry has reacted positively, but the Government must now keep up the momentum. A long-term plan is needed to tackle the ongoing skills crisis, as well as a concerted effort to diversify the housing market by supporting SME builders, if the Government is serious about meeting its ambitious goals.”

Bragging Rights with Caveats

Josh Ward-Jones, Director of Bloom Building Consultancy, commented: “After a weak first half of the year, construction has surged to become the fastest growing industry in Britain’s slowing economy.

“But construction’s bragging rights come with caveats. The expansion posted in the third quarter came after three successive quarterly falls, so while the turnaround is welcome, total output is still down on where it was at this point in 2023.

“There’s also a two-speed feel to the industry data, with private sector housebuilding stuck in reverse as high interest rates continue to hold back developers’ willingness to buy land and build homes.

“The picture is even more alarming when you look at the pipeline. The value of new orders placed by private sector housebuilders fell by a third on the quarter, and is down by a painful 34.4% compared to Q3 2023.

“Such a sharp slowdown in developer demand for residential construction underscores the huge task the Chancellor faces in her quest to re-energise housebuilding.

“Labour has promised to ‘get Britain building again’ and get 1.5 million more homes built in England over the next five years. The sector now awaits with interest the planning reforms and release of green belt land the Government says will kickstart housebuilding in areas where people want to live.

“Things are more positive in commercial real estate. New orders for commercial construction in the third quarter were up a modest 2.8% compared to Q3 2023, but levels of repair and maintenance work rose strongly.

“On the front line we’re seeing strong demand from commercial property landlords keen to invest in repair and refurbishment to generate extra value from existing buildings.

“Infrastructure and civil engineering builders are licking their lips at the prospect of the huge projects announced in last month’s Budget, but for many housebuilders the elephant in the room remains the high cost of borrowing and all eyes will be trained on the Bank of England to see if it will reduce interest rates further to help boost Britain’s flagging economy.”

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