Strong September 2021 Bounce Back for Construction

IN A STRONG SEPTEMBER, construction activity grew by 1.3% bringing the month to 1.0% (£141 million) below the level of February 2020, before the pandemic.

According to the latest data from the Office for National Statistics (ONS), September’s increase in output was the first since June 2021. New work was 3.5% (£334 million) below the February 2020 level, and infrastructure was the only category above that level.

Repair and maintenance work was 3.9% (£194 million) above the February 2020 level. All repair and maintenance sectors apart from public housing showed higher output in September 2021 than before the pandemic

Slower Quarter3

Despite the monthly growth in construction activity, slower growth in July 2021 (1.2%) and August 2021 (0.7%), saw the overall quarterly growth fall by 1.5% in Quarter 3 (July to Sept) 2021, compared with Quarter 2 (Apr to June) 2021.

Total construction new orders fell 9.2% (£1,221 million) in Quarter 3 2021, compared with Quarter 2 2021. This is the first quarterly fall since Quarter 2 2020, after four successive increases in quarterly growth.

Across Quarter 3 2021, anecdotal evidence reported in the Monthly Business Survey for Construction and allied trades suggested that the rising prices of raw materials such as steel, concrete, timber and glass, plus their disrupted supply contributed to the overall fall in the quarter. Many contributors said that while order books were healthy, the availability of certain construction products was affecting projects currently underway.

Record Breaking Construction Prices

The annual rate of construction output price growth was 5.1% in September 2021. This was the strongest annual rate of construction output price growth since records began in 2014.

At the type of work level, the annual rate of price growth in the 12 months to September 2021 was at its strongest in new housing (7.5%) and private industrial new work (6.3%).

INDUSTRY COMMENT

Turning Point

Fraser Johns, finance director at Beard

Fraser Johns, finance director at Beard said: “The growth recorded in September is an encouraging sign. Following a concerning trend of declining output, this will hopefully mark a turning point for the construction industry.

“Recovering from the pandemic was never going to be plain sailing the whole way. Despite the positive signs in September, looking at the quarter as a whole, Q3 marked the first quarterly fall in output since Q2 2020.

“However, it appears client confidence is gradually returning in the market, as new work increased in September. As more clients are giving the green light to projects, it appears supply chain issues and price rises for raw materials will not be an insurmountable challenge.

“By working closely with suppliers, and with clients, lead in times can be built into projects. At Beard, we are well positioned to handle the disruption caused by the supply issues due to the relationships we’ve built with suppliers. These allow us to have open and honest conversations, which ensure if we do run into supply issues, we can work with the supplier and client to overcome these.”

Cautious Encouragement

Clive Docwra MD of McBains

Clive Docwra, Managing Director of property and construction consultancy McBains, said: “September’s return to growth will give the construction industry a degree of encouragement that it may be turning the corner, after five successive falls in monthly output.

“The industry will be cautious however, as output is still below pre-pandemic levels.  The Quarter 3 figures also published today also show a fall in output compared to Quarter 2, reflecting the volatility in certain work sectors – a decline in infrastructure and private commercial new orders in particular.

“The quarterly figures also reflect that supply chain problems linked to a shortage of haulage drivers were impacting to a certain extent, but these should be past their peak and are smoothing over.  However, the cost of essential materials remains high, and skills shortages are still biting, leading to some new work being put on hold because there just aren’t enough skilled workers available.”

>> Read more about construction output in the news