Construction Output Falls in May But Up on Quarter

CONSTRUCTION OUTPUT in May 2023 is estimated to have decreased 0.2% to £15,360 million, which is the third consecutive monthly fall.

Figures released today by the Office for National Statistics (ONS) showed the decrease in monthly output came solely from a decrease in new work (0.4% fall), with repair and maintenance being flat (0.0%) on the month.

At the sector level, four out of the nine sectors saw a fall during the month. Non-housing repair and maintenance decreased by 2.5% on the previous month and private housing new work decreased 1.7%.

Anecdotal evidence referred to a slow-down in private housing due to customers’ economic worries. Meanwhile, some businesses in other sectors continued to report an easing of inflation.

Quarterly Performance

During the three months to May, construction output increased by 0.2%, making it the ninth period of consecutive growth measured in three month cycles. However, it is the weakest growth since the 0.1% fall in the three months to August 2022.

Repair and Maintenance

While new work saw a decrease of 1.3% during the three months, the increase came solely from a rise in repair and maintenance of 2.5%. This is a weaker performance compared with the start of the year when private housing repair and maintenance grew by 3.9%).

Non-housing repair and maintenance was the other main contributor to the three-month-on-three-month increase, growing by 1.6%, despite the decrease on the month.

INDUSTRY COMMENT

Terry Woodley, MD of Development Finance at Shawbrook Bank, says: “Economic uncertainty, stickier inflation and rising interest rates continue to hamper activity and cause headaches for developers. However, with an increasing shift back towards office working and an urgent need for quality housing, challenges are likely to be short lived.

“As more employers encourage a return to the workplace, a renewed need for office space is seeing companies race to refurbish existing offices or review their needs for additional space.”

“Meanwhile, new housing is high on the agenda for developers, as the UK continues to suffer from a lack of quality supply to meet heightened demand. This is making new builds an increasingly attractive proposition, though opportunity still remains in existing property. With many properties requiring refurbishment to meet future EPC efficiency regulations, builders and developers should expect a steady uptick in activity for the months to come.”

>> Read ONS’ March 2023 report here