Construction Output Up on Quarter Despite December Drop Off

CONSTRUCTION OUPUT is estimated to have increased by 0.5% (£241 million) in Q4, 24 compared with Q3, 24.

The latest figures from the Office for National Statistics show the quarterly increase for Q4, 24 came from an increase in new work (1.2%), as repair and maintenance fell by 0.4%. November 2024’s monthly growth figure was up 0.6% following no growth in October 2024 (revised from a fall of 0.3%).

Of the nine sectors, six saw increases in Q4, 24, with the largest contributors being private new housing and public other new work. These sectors grew by 1.3% (£127 million) and 4.3% (£121 million), respectively.

December Construction Output

Monthly construction output is estimated to have fallen by 0.2% in volume terms in December 2024, owing to a fall in repair and maintenance (1.8%) as new work grew by 1.1%. This represents a decrease of £40 million in monetary terms compared with November 2024, with five out of the nine sectors seeing falls on the month. The volume in December 2024 was £17,744 million.

Anecdotal evidence suggested a negative effect of seasonal weather decreasing output as December saw unsettled weather, with Storm Darragh bringing heavy rain and gales.

Non-housing repair and maintenance, and private housing repair and maintenance were the largest negative contributors to the monthly decrease in December 2024, decreasing by 1.8% (£74 million) and 1.4% (£41 million), respectively.

Total construction new orders fell by 2.4% (£231 million) in Q4, 24 compared with Q3, 24.

Q4, 24 showed the lowest level of total construction new orders (£9,268 million) since Q2, 20 (£6,024 million).

This quarterly decrease came from infrastructure new work, which fell by 23.5% (£496 million), and was driven by decreases in electricity, harbours and railways. The other contributor was private industrial new orders, which fell by 19.7% (£197 million).

Housing new orders saw an increase of 21.2% (£442 million). This came predominantly from private new housing, which increased by 24.0% (£438 million). Public new housing also increased by 1.6% (£4 million).

Annual Increase

Overall, annual construction output increased by 0.4% in 2024 compared with 2023, marking the fourth consecutive year of annual growth.

The annual increase in 2024 was solely because of a rise in repair and maintenance, which rose by 8.5%, as new work decreased by 5.3%.

At the sector level, four of the nine sectors saw an increase in annual growth in 2024. Non-housing repair and maintenance, and private housing repair and maintenance were the largest positive contributors, growing by 8.5% and 7.0%, respectively. The main negative contributor to annual growth was infrastructure new work, which fell by 9.3%.

The annual rate of construction output price growth was 3.0% in the 12 months to December 2024.

COMMENT

Green Shoots Poking Through

Terry Woodley, MD of Development Finance at Shawbrook

Terry Woodley, MD of Development Finance at Shawbrook, commented: “The construction sector ended the year on a high, with Q4’s figures showing a quarterly increase in activity, despite a month-on-month decrease.

“Moving into the new year, green shoots are poking through and prompting improved confidence levels in developers. Further clarification of the Government’s next steps for reducing planning red tape and boosting housebuilding has been released, making developers feel more supported and hopeful for 2025. However, challenges with recruitment and supply chains have emerged in recent months and will need to be addressed if construction output is to truly bounce back this year.

“As we approach the Spring Statement, developers should continue to keep an eye out for any further updates from the Government. Speaking to a broker will also help clarify financing options, especially if developers feel the need to shift business plans in line with projected activity this year.”

Momentum Remains

Gareth Belsham, Director of Bloom Building Consultancy

Gareth Belsham, Director of Bloom Building Consultancy, commented: “Construction lurched rather than limped across the finish line at the end of 2024. After flatlining in October, jumping in November and then shrinking in December, total output across the industry was mixed.

“But for all the monthly volatility, momentum remains. In 2024 as a whole, the industry grew by 0.4% compared to 2023, chalking up a fourth consecutive year of expansion.

“However, question marks linger about how resilient the growth is. More than half of the nine subsectors tracked by the official data contracted in December.

“Of far greater concern is the continued slowing of the new orders pipeline. The total value of orders placed in the final quarter slumped by 2.4% compared to the preceding three months. It now stands at the lowest level seen since the shutters came down on much of the UK economy during the first Covid lockdown of 2020.

“The fact that the Q4 slowdown in orders coincided with the Chancellor’s bearish Budget will make awkward reading in 11 Downing Street, but the decline began long before that. New orders shrank by nearly a quarter in the third quarter, suggesting that the fragility of business sentiment has deeper roots.

“Yet there are bright spots. Orders for private sector housebuilding surged in the final quarter of the year, as residential developers who held off for much of 2024 decided to pull the trigger on previously paused schemes.

“Meanwhile commercial property builders ended the year on a high. The value of commercial orders placed in the final quarter was 15.1% higher than in the same period in 2023, and orders surged by 16% in 2024 as a whole.

“The industry has begun 2025 finely poised. The Chancellor is making all the right noises about construction being an engine of wider economic growth and the prospect of falling interest rates will make it easier for developers to buy land and get building.

“For all the momentum, business sentiment is patchy and developers, landlords and investors are laser-focused on value and proceeding with caution.”

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