June 2023 Boost to Construction Output

MONTHLY construction output increased by 1.6% in June 2023, with increases in both new work (2.0%) and repair and maintenance (1.1%) on the month.

At the sector level, six out of the nine sectors saw a rise during June 2023, with the main gains in infrastructure new work and non-housing repair and maintenance, which increased 4.7% and 3.4%, respectively.

Quarterly Figures

Quarterly construction output increased 0.3% in Quarter 2 (April to June 2023) compared with the previous quarter. Quarter 2’s increase came solely during June 2023, with an increase in repair and maintenance (0.9%), while new work saw a decrease of 0.1%.

Total construction new orders decreased by 7.1% to £786 million in Quarter 2 compared to the preceding quarter. Decreases came mainly from public other new orders which fell by 32.9% to £576 million, and infrastructure new orders, which reduced by 26.5% to £519 million.

The annual rate of construction output price growth was 4.6% in the 12 months to June 2023, slowing from the record annual price growth in May 2022 of 10.4%.

INDUSTRY COMMENTARY

Dr David Crosthwaite, BCIS Chief Economist

Dr David Crosthwaite, Chief Economist at independent provider of construction data, BCIS, said: “Private housing, which saw a 3.3% decrease in the second quarter, has not fallen as much as we expected, as housebuilders built out sites that were already committed, but this sector is likely to fall more than 15% in 2023 as a whole.

“With private housing representing over a third of total new work output, any decline in this sector is likely to have a significant effect on output overall. Despite suggestions this week that mortgage lenders could spark a price war by lowering interest rates on fixed-rate deals, with an expectation that the base rate will rise again, we’ll continue to see the effects of reduced starts into 2024.

“In 2022, private commercial output was down nearly 30% since 2019, and almost 40% since 2007. While we don’t expect any further dramatic decline in this sector, recovery will be slow as the requirements for both office and retail space have changed fundamentally.”

Looking ahead, ONS data on construction new orders showed a decrease in the second quarter of 2023, by 7.1% overall and with infrastructure down 26.5% on the first quarter.

Dr Crosthwaite said: “Based on published spending plans and what we know is in the project pipeline, we are forecasting continued growth in infrastructure output, but a lack of clarity in national policy and the ongoing effects of inflation on fixed budgets could put this outlook at risk.

“All eyes will be on the Government in the autumn to see what investment commitments they make. Further, the spectre of labour shortages looms over all sectors, not least infrastructure, where the Civil Engineering Contractors Association reported in 1Q 2023 that there were continued difficulties with the supply of skilled operatives and staff for civils firms.

“With construction roles added to the Shortage Occupation List on Monday (7th August), it remains to be seen how successful the scheme will be in attracting workers to the UK. Housing generally has first call on skilled labour, so the dip in demand there is possibly good news for the infrastructure sector as it may take some of the delivery pressures from projects, at least in the short term.”

>> Read more construction data in the news