January construction output reaches two-year high

It added that building activity is now at its highest level since September 2019.

The ONS says construction output in January came “solely” from an increase in repair and maintenance activity, which lifted by 4.6%, as new work saw a fall of 0.8% in the month.

A more representative quarterly view shows construction rose by 3% in the three months to January, the strongest quarterly rise since June 2021. New work rose by 4% and repair and maintenance lifted by 1.4% in the three months to January.

Building output in January was 1.4% above the February 2020 pre-pandemic level.

The data body adds that “anecdotal evidence” suggests that “some of the issues in sourcing construction products in the latter half of 2021 had continued to ease”.

McBains managing director Clive Docwra says: “This third successive monthly rise in growth greater than one per cent shows the construction sector is emerging with resilience from the post-Covid downturn.

“However, growth is being driven by repair and maintenance work rather than an increase in new contracts, suggesting that investment in new projects is still sluggish in some areas, particularly private commercial work.

“The outlook for the immediate future is also much less rosy – energy price rises will soon bite, plus the war in Ukraine will ramp up these costs further, and the conflict will also have an impact on supply and price of many materials used on UK building projects. Both factors will exacerbate inflationary pressures, which could derail any longer-term recovery.

“It all means construction needs a helping hand, and the chancellor, in his spring statement later this month, could pause the planned national insurance rise to give business some breathing space.”

Assetz Group chief executive Stuart Law adds: “The biggest impact on construction output and market dynamics over the coming months will be the tragic crisis taking place in Ukraine at present, which will likely have a multitude of knock-on effects in the UK.

“Firstly, will be the impact of the UK’s decision to move away from utilising Russian fossil fuels and the cost of finding alternative energy sources.

“The energy price shock is likely to force a huge change in attitudes to home energy efficiency and radically impact demand for homes with lower running costs versus those that are expensive to run, with new homes being the main beneficiary ..

“The second knock-on effect will be determined by the impact of the conflict on the broader UK economy. Although the appetite for new homes is likely to remain mostly unchanged, economic uncertainty caused by the situation coupled with rising inflation could put a dent in market demand.

“That said, with the Bank of England expected to scale back interest rate hikes as a result of the crisis, it seems more likely that the market will continue to be driven by low-interest rate mortgages for some time, causing prices to rise further as housebuilders struggle to meet demand.”