The latest ONS figures on monthly construction output saw the first rise of 1.6% in volume term for three months, from new work and repair and maintenance
Warm weather may be responsible for the uptick in monthly construction output, according to anecdotal evidence from the Office of National Statistics (ONS).
The Met Office confirmed that June 2023 had the warmest provisional mean temperature since 1884.
This is the highest level of construction output (£15,620m) since records began in January 2010.
Increases in new work(2.0%) and repair and maintenance (1.1%) were cited as causing the 1.6% rise in volume terms on the month after three consecutive months of decline.
June also provided the boost needed for the increase seen in quarterly construction output, growing by 0.3% between April and June. Here, repair and maintenance rose 0.9%, but new work dropped by 0.1%.
Six out of nine sectors saw an increase in June 2023
Private housing repair and maintenance(-0.1%), public housing repair and maintenance(-0.1%) and private industrial new work(-0.2%) all decreased on the month.
Infrastructure new work and non-housing repair and maintenance saw the highest rises of 4.7% and 3.4%, respectively.
Feedback to the ONS indicated that good weather had allowed work to progress, leading to the increases in monthly construction output.
However, new orders stalled in June
Total construction new orders decreased 7.1% (£786m) in Quarter 2 2023 compared with Quarter 1 2023; this quarterly fall came mainly from public other new orders and infrastructure new orders, which fell 32.9% (£576m) and 26.5% (£519m), respectively.
In terms of annual rate, construction output price growth was 4.6% in the 12 months to June 2023; down from the record rates in May 2022 (10.4%)
Industry thoughts were cautiously optimistic
David Savage, partner at Charles Russell Speechlys, said “Although the cost of materials remains high, new work and an increase in repair and maintenance seems to have carried momentum as we head into the summer, instilling a new sense of confidence across the sector.
“Whilst no doubt a positive picture, high interest rates and costs mean that some developers and investors are still delaying new projects, as the industry continues to face challenges due to the wider economic environment.”
Mike Hedges, director at Beard Construction, added: “We’ve seen firsthand this consistent trend of clients looking to improve and repair, rather than replace. For some, this may reflect the tougher borrowing conditions and access to credit that is preventing them from committing to new construction projects. However, we’re seeing greater emphasis being placed on maximising the value of the assets they already have, as well reducing both waste and the loss of embodied carbon.
“Nonetheless, infrastructure new work continues to play an important part in the industry’s recovery, increasing 4.7% in June. This is fourth consecutive monthly increase and comes as no surprise to us at Beard. Frameworks remain incredibly active across the south west and a key driver in pipeline activity, with specialised projects in the likes of healthcare and education.”
A positive sign for the future on construction output
“The continued easing of inflationary pressures will certainly help in improving the outlook for the second half of the year, especially in sectors such as housebuilding where higher interest rates have had the biggest impact on demand,” Hedges continued.
“Even so, the industry must remain agile and respond to opportunities presented by the most active sectors. As ever, we remain vigilant to changing market conditions and the global impact on the UK economy as we look ahead to the end of the year and beyond.”
You can read the latest monthly construction output figures in full here.
