Second Monthly Decrease in Construction Output in July 2022

IN A SECOND monthly decrease in construction output July’s figure fell by 0.8%, following a 1.4% decrease in June 2022.

July’s drop follows seven consecutive months of growth in the construction sector between November 2021 and May 2022.

Second Monthly Decrease

July’s decrease in output was solely from a lessening in repair and maintenance work, which reduced by 2.6%. New work saw a slight increase (0.3%) on the month.

At the sector level, the main contributors to the decrease seen in July 2022 were public housing new work, and public and private housing repair and maintenance, which decreased 13.1%, 8.0% and 2.6%, respectively.

Pre-Pandemic Levels

The level of construction output in July 2022 was 2.1% (£300 million) above the February 2020 pre-coronavirus (COVID-19) pandemic level.

While repair and maintenance work was 9.7% (£481 million) above the February 2020 level, new work was below it, at 1.9% (£181 million).

Quarterly Figures

Despite the monthly decrease, construction output increased 1.4% in the three months to July 2022. The overall quarterly increase came solely from an increase seen in new work (2.7%) as repair and maintenance saw a slight decrease (0.7%).

This is the ninth consecutive period of growth in the three-month-on-three-month series, but the slowest rate of growth since the three months to December 2021 (1.0%).

In a record high, the annual rate of all construction work price growth is 9.6% in June 2022.

COMMENTARY

Holding Off

Clive Docwra, Managing Director of McBains.

Clive Docwra, Managing Director of London-based property and construction consultancy McBains, said: “July’s decrease in output in part reflects falling demand because of increasing cost of living pressures, and uncertainty over the UK economic policy given the contest over who would become the next Prime Minister.

“It has meant many clients – from households considering low-scale home improvements to investors and developers contemplating major new projects – held off committing investment.

“Supply bottlenecks are also continuing to impact, especially with materials coming from China being affected by the partial or full lockdowns in dozens of Chinese cities.

“The effect of Russia’s invasion of Ukraine is also starting to bite harder.  Many construction firms were protected from the increases in energy and material prices because they used forward contracts for energy and to pre-purchase materials and products where possible, but that has merely delayed pressures that are now being felt more intensely.

“To ease the energy crisis, the construction sector would have liked to see the Truss administration support a major home insulation programme, which would not only help fix Britain’s leaky and energy-inefficient homes and help cut bills, but also provide work for smaller construction firms who are in particular feeling the pinch at present.”

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