December 2021 Construction Growth as Prices Rise

CONSTRUCTION OUTPUT increased by 2% in December 2021, according to the latest official figures from the Office for National Statistics (ONS).

The month’s growth came solely from an increase in new work (3.5%), while repair and maintenance saw a fall of 0.7% on the previous month.

December 2021 Construction Growth

Comparing the level of construction output in December 2021 to pre-pandemic levels, it was 0.3% (£35 million) above the February 2020 mark. This breaks down into new work – 2% (£190 million) below the 2020 level, while repair and maintenance work was 4.5% (£225 million) above it.

ONS says that despite the monthly increase in December 2021, late and revised data for autumn 2021, means output has recovered less than previously estimated. The organisation also warns that estimates for December 2021 are uncertain because data collection problems during the Omicron outbreak have led to lower response rates than normal.

That said, the figures show that quarterly construction output increased 1% in Quarter 4 2021 (Q421), compared with Q321 and both new work (1.1%) and repair and maintenance (0.8%) saw increases.

Yearly Growth

For the year, construction output increased by a record 12.7% in 2021 compared with 2020, mainly as a result of the coronavirus pandemic contributing to a very weak 2020, which saw the record largest decline in annual growth of 14.9%.

Within the year, total construction new orders increased by 9.2% (£1,121 million) in Q421 compared with Q321. That means that total new orders are now at their highest level (£13,326 million) since Q317, which was affected by large value orders for High Speed 2 (HS2) contributing to the figures.

Construction Prices

Across the year as a whole, construction output price growth was 6.2% in 2021, giving the strongest annual growth rate since records began in 2014.

Comparing types of work, the highest price growth during the year was for new housing (9.9%), which is the strongest growth since records began in 2014.

COMMENTS

Brian Berry, Chief Executive of the Federation of Master Builders

Fall in domestic work

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: “While it’s promising to see a 3.5% increase in new work during December 2021, many local builders remain fearful that increased costs facing consumers will precede a downturn in building projects during 2022. As the cost-of-living increases, consumers have less disposable income to upgrade their homes and it will be the small construction firms that will suffer the most.

“SME builders have dealt with sharp increases in the cost of materials, as well as facing skills shortages, exacerbated by Brexit and the Covid pandemic. This puts builders in the unenviable position of having to raise prices for a customer base that are tightening their belts.

“The UK’s small builders are vital to local economies and will be crucial to delivering levelling up, so we hope to see policy measures introduced to ensure the sector continues to stay buoyant during what will be another turbulent year.”  

Tonic to the industry

Clive Docwra MD of McBains

Clive Docwra, Managing Director of property and construction consultancy McBains, said: “After last month’s figures showed a welcome increase in output following the easing of supply chain bottlenecks, today’s figures will be a further tonic to the industry, especially because the impact of Omicron was expected to have disrupted work.

“Particularly encouraging is that output was above pre-pandemic levels, and although new work remains below that of February 2020, this is likely to represent a seasonal pause in work rather than a reluctance by investors to commit to new projects.

“With total construction output increasing 12.7% in 2021, the largest increase since annual records began in 1997, it looks like construction is bouncing back from the pandemic.

“However, it’s too soon to start hailing this as a long-term recovery, especially as the industry expects soaring electricity and gas prices will bite harder in the coming months as building products manufacturers pass on the costs of making bricks, steel, concrete and cement to construction firms.”

Path to recovery

Fraser Johns, finance director at Beard

Fraser Johns, finance director at Beard, commented: “The increase in construction output in December was driven by new work. With clients green lighting projects in greater numbers, this suggests confidence is growing, and the start of 2022 looks bright.

“When looking at 2021 as a whole, output increased by a record 12.7% compared to 2020. Output has now hit pre-pandemic levels, and although it has been a long and winding road, it appears we are firmly on the path to recovery.

“The construction sector has shown its resilience in 2021 and a key enabler of this is stakeholder relationships. At Beard we develop our relationships with suppliers and sub-contractors with regular meetings. And these meetings, coupled with our prompt payment policies have ensured we have been able to overcome any hurdles.

“Communication was also crucial in weathering the storms of 2021. Both interacting with employees, suppliers and sub-contractors was essential to keeping projects on track.”

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