New Construction Figures Show Slowdown in Recovery

THE LATEST CONSTRUCTION output figures from the Office for National Statistics show a slowdown with the first monthly reduction since April.

Output decreased by 2.9% in December 2020 compared with November 2020, falling to £13,516 million.

This was the first monthly decline in growth since the record fall of 40.7% in April 2020. It takes the level of construction output to the lowest level since August 2020 when it was £13,181 million.

Quarter 4 2020

In contrast to the monthly figure for December, output for Quarter 4 (Oct – Dec, 2020) grew by 4.6% compared with the previous quarter.

The growth in the last quarter (Q) of 2020 was driven by the monthly increases in October and November 2020, which grew 1.3% and 1.7% respectively, and offset the 2.9% fall in December 2020.

New work increased by 4.0% in the quarter with growth in all new work sectors, apart from private commercial, which decreased by 1.6%. Repair and maintenance grew by 5.5% with all repair and maintenance sectors increasing output. The largest contributor was non-housing repair and maintenance, which grew by 5.5%.

Apart from Q3 2020, the growth in Q4 2020 is the largest since Q2 2010, when output grew by 4.9%. The quarterly growth in Q4 2020 is the fourth-largest overall since quarterly records began in 1997.

Construction sectors

All work construction output in December 2020 was below its pre-coronavirus level, at 3.5% (£492 million) below the February 2020 level. Breaking down the sectors, all repair and maintenance remains above the February 2020 pre-coronavirus level, while only infrastructure was above this level for new work.

All other types of work in December 2020 were below their pre-coronavirus levels, with public new housing the furthest below its February 2020 level at 22.3%.

2020 pandemic compared with 2008 to 2009 recession

In its latest release, ONS compares the profile of the fall and recovery in output, in the 2008-2009 recession and the impact of the pandemic. It concludes that while the peak-to-trough fall in output for the 2020 pandemic was substantially larger, it is noticeable how much quicker the industry has recovered than after the 2008-2009 recession.

ONS says the construction industry has been less affected by restrictions than other parts of the economy. Recovery has been driven by the bounce-back in repair and maintenance.

INDUSTRY RESPONSE

Hugely Concerning

Clive Docwra MD of McBains

Clive Docwra, Managing Director of construction consultancy and design agency McBains, said: “Today’s figures are hugely concerning. Output was 3.5% below pre-coronavirus levels in December compared to November.

“The reason for the recovery over the previous months was due in no small part to a strongly performing housing sector.  But the imminent end of the stamp duty holiday could see a reverse, especially when today’s figures show that private new housing work already fell by 3% in December.

“New commercial work contracts remain at low levels, with today’s figures showing a 6% fall in private commercial work.  This is in part due to the office sector deciding on what changes to make to its real estate as a result of the pandemic and the impact on working patterns.

“All this uncertainty means that continued government public spending commitments are necessary to support an industry that is still feeling its way back after the impact of Covid-19.”

Construction Challenges

Fraser Johns, finance director at Beard, said: “After a seven month period of growth, there are still challenges within the construction sector as demonstrated by the 2.9% dip in December.

“Now we have a full picture of 2020, we are reminded of the large impact the pandemic has had on the sector, with the 12.5% drop being the largest year-on-year decrease since 2009.  We remain positive of a rebound, but must remain attentive to further implications of Brexit and new strains of the virus.

“Disruption to international supply chains will be a challenge moving forward and the road to recovery will certainly not be simple. The governments recently released ‘Construction Playbook’ will play an important role in pushing the industry forward and the commitments to long-term projects will be crucial.

“The government has set ambitious targets for housebuilding and infrastructure construction, and the sector will need to ensure we have enough people with the right skills to fulfil these projects.  Training and investment in our people continues to be of high priority.”