September 2023 Construction Output Rises Slightly as New Work Falls

CONSTRUCTION OUTPUT for September 2023 is estimated to have increased 0.4% in volume terms, in the latest Office for National Statistics (ONS) figures released today.

The rise represents an increase of £60 million compared with August 2023.

The ONS says that anecdotal evidence suggested a positive effect from September’s above-average temperatures increasing construction output. September 2023 was the joint hottest September on record for England and Wales.

Construction Sectors

At the sector level, three out of the nine sectors saw a rise in September 2023, with the main contributor to the monthly increase seen in private housing repair and maintenance, which was partially offset by a decrease in new work on the month.

Private housing repair and maintenance and private commercial new work were the largest positive contributors to the monthly increase in September 2023, increasing 3.0% (£76 million) and 3.6% (£66 million), respectively.

Quarter-on-quarter Growth

Alongside the monthly increase, construction output rose by 0.1% (£58 million) in Quarter 3 (July-Sept) 2023. This is the eighth quarter of consecutive growth in the quarterly series since Q3,21. However, quarterly growth has slowed compared with the first half of 2022.

The quarterly growth came solely from an increase in repair and maintenance (0.7%), as new work saw a decrease of 0.3%.

The quarterly increase also came solely from September 2023, as the other two months of saw decreases. Anecdotal evidence for September 2023 highlighted the effect of warm weather increasing output.

Of the nine sectors, three saw increases in Q3,23, with the largest contributors being non-housing repair and maintenance and private commercial new work. These sectors increased 2.0% (£187 million) and 5.1% (£276 million), respectively.

The largest negative contributor was private new housing, which fell 2.8% (£260 million).

New Orders in Quarter 3 2023

In Quarter 3 2023, total construction new orders increased by 3.9% (£393 million) compared with Q2,23. This follows three consecutive quarterly falls in total construction orders.

Other new work new orders (that is, non-housing) was the largest contributor to the increase in Q3,23, increasing by 5.3% (£367 million). This mainly came from public other new orders, which increased by 23.7% (£265 million) and was caused by increases in schools and colleges, agriculture, and miscellaneous.

The other largest contributor was infrastructure, which increased by 14.3% (£204 million). Private industrial saw the only decrease which was a fall of 7.8% (£103 million).

Housing new orders saw an increase of 0.8%. This came from both private and public housing, which saw increases of 0.9% and 0.1%, respectively.

Construction Prices

Lastly, prices in the construction industry decreased to 3.9% in the 12-month period to September 2023. The rate of annual price growth has slowed from the record increases seen in May 2022 (10.4%).

INDUSTRY COMMENT

Difficult Period

Brian Berry, Chief Executive of the Federation of Master Builders

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: “In what is looking like a difficult period for our industry, it is pleasing to see growth in construction output this month, which has contributed to overall gains for this quarter. Whilst both the private housing and non-housing repair and maintenance sectors are performing well, this should not distract from the fact that the uptake of new work has continued to fall this month, and presents a major long-term challenge to the overall outlook.”

 “The strong performance of repair and maintenance cannot be allowed to mask the fact that this month’s modest overall growth in construction output follows two consecutive months of falls, and that house building rates remain in decline. Action to rectify this alarming decline in new housing was a notable absence from this week’s King’s Speech and the Government needs to make this an urgent priority going into the new year.”

Developers Adapting

Terry Woodley, MD of Development Finance at Shawbrook, commented: “Construction output has remained robust in the face of rising costs and a turbulent economic landscape.

“However, developers have had to adapt. Recent research from Shawbrook shows that rising costs are still the biggest challenge for developers at present, with two-in-five listing this as their biggest concern. With 96% having already made changes to their strategies in the past 12 months, developers are regularly assessing demand in different business areas to maximise returns and future proof their businesses against further economic headwinds.

“This shift is evident in our research, which shows that developers are moving away from private housing developments and prioritising more diverse projects, including developments such as hospitality, new build city flats, student accommodation and high street retail units amongst other property types.”

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