Construction output up, but medium-term concerns loom

Construction output for the past month has risen slightly. However, high price levels pose a cause for concern in the medium term.

Data provided by the Office for National Statistics (ONS) showed that quarterly construction output in the three months to September 2022 climbed 0.6 per cent.

Private commercial orders drove this growth, rising 5 per cent over the previous quarter, which ran April to June 2022.

Business advisory firm RSM UK’s national head of construction Kelly Boorman attributed this rise to work that was agreed before the price increases.

“Private commercial orders have driven much of the activity for Q3 2022, as businesses uphold their commitment to finishing work and have decided to ‘get on with it’ while they have the labour to absorb it,” she said.

Comparing the quarter with the previous year, private industrial work soared by nearly 60 per cent, while there was a 9.7 per cent drop in infrastructure work.

Absolute construction output for September 2022 also reached £15.125m, which was the highest ever, since records began in January 2010.

This marked a 0.4 per cent rise in monthly output, which was led by a 11.3 per cent rise in repair and maintenance work in public housing.

Boorman said this reflected the demand to prepare homes for the winter months.

Anecdotal evidence from the ONS showed that this increase in monthly output was seen despite increased costs of products like concrete, plaster, bricks, sand, gravel and asphalt-related products as well as the loss of a working day with the bank holiday for the funeral of Queen Elizabeth II.

Quarterly new orders also rose by 6 per cent, which reversed the downward trend seen in the previous two quarters.

However, experts have warned that these signals of short-term growth could shape a “backward-facing view”.

Law firm Charles Russell Speechlys’ head of construction, David Savage, said: “With the certainty now of recession in 2023, and materially higher interest rates for the medium term, a significant number of developers and investors will be looking to press the pause button until the economic realities of inflation have become clearer.”

ONS data showed that prices in the construction industry rose to 10.1 per cent in year to September 2022, which although lower than the record levels reached in May 2022, was still high by historic standards.

Businesses now look to the impending Autumn Statement for news on public spending.

Framework provider Scape’s group chief executive Mark Robinson said: The chancellor’s Autumn Statement next week will undoubtedly be a point of focus for the sector. Investment in community-led infrastructure will be more important than ever over the next few months, so commissioning local authorities will need to work closely with their delivery teams to minimise the impact any public spending cuts will have on their new and existing projects.”

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