The latest ONS figures for construction output in July 2022 showed a second consecutive decrease in monthly construction output, following seven consecutive months of growth in the sector between November 2021 and May 2022
Construction output in July 2022 decreased across volume, repair and maintenance with a slight 0.3% increase in new work.
The figures show a decrease in output, but not to the extent seen in 2020
Following the 1.4% decrease in June 2022, monthly construction output decreased 0.8% in volume terms in July 2022; this is the second consecutive decrease in monthly construction output after seven consecutive months of growth.
The decrease in monthly construction output in July 2022 came solely from a decrease in repair and maintenance (2.6%) as 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.
The level of construction output in July 2022 was 2.1% (£300 million) above the February 2020 pre-coronavirus (COVID-19) pandemic level; new work was below at 1.9% (£181 million) its February 2020 level, while repair and maintenance work was 9.7% (£481 million) above the February 2020 level.
Despite the monthly decrease, construction output increased 1.4% in the three months to July 2022; this came solely from an increase seen in new work (2.7%) as repair and maintenance saw a slight decrease (0.7%), and 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%).
Supply chain issues and the cost-of-living crisis had an impact on construction output in July 2022
As in previous months, increased costs of products, most notably concrete, plaster, bricks, sand, gravel and asphalt-related products, are mentioned. There have also been continued mentions of higher fuel and energy costs, and VAT tax increases for red diesel, which have had an impact again this month.
Feedback indicated that output was affected by the loss of working days during record high temperatures over the summer and that fewer people were seeking repair and maintenance work due to the cost of living crisis.
Clive Docwra, managing director of property and construction consultancy McBains, said:
“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.
After a summer of political turbulence, the Government needs to make bold moves in boosting energy efficient technologies across the sector
Clive continues: “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.
“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.”
Dave Sheridan, executive chairman of TDR Capital-backed modular housebuilding pioneer, ilke Homes, said:
“The latest ONS Construction Output figures show just how much the current cost of living crisis is biting down on people’s livelihoods. As materials, labour and energy have become so much more expensive due to lack of supply, the output of retrofit jobs has decreased across the board. People are looking to improve the energy efficiency of their homes ahead of a difficult winter, but money is scarce and Government stimulus is no longer there.
“Supply-side intervention in innovative housebuilding methods is needed. Currently even private housebuilders are struggling to build fast enough to meet demand and the traditional housebuilding sector is struggling to generate growth. New innovative methods of private housebuilding must be sought.
“With its highly deliverable, precision-engineered models and an industry shift towards low carbon manufacturing and operation, MMC providers are best placed to weather the oncoming storm. However, the Government is not committing to the supply-side push the wider industry needs.
Despite last week’s Government intervention on energy bills, as the soaring cost of energy and limited materials supply come to dominate the conversation around house building, the need for more sustainable, energy efficient modular housing has never been greater.
“It will be delivering these sustainable housing options at pace, which will hold the keys to unlocking growth within the wider sector at a time when the economy, and the UK’s housing supply, desperately need a shot in the arm.”
