Monthly construction output decreases first time since October last year: ONS

While both May and June were affected by the timing of the Jubilee bank holiday, the latest figures represent the first decrease since October last year when it stood at 0.9% following seven consecutive months of growth.

The decrease in monthly construction output in June came from falls in both new work at 2% and repair and maintenance at 0.2%.

At the sector level, the main contributors to the decrease in June were private new housing and private commercial new work, which decreased by 6.1% and 4.5%, respectively.

The level of construction output in June was 2.9% (£414m) above the February 2020 pre-coronavirus pandemic level; repair and maintenance work was 12.6% (£626m) above the February 2020 level while new work was 2.2% (£212m) below its February 2020 level.

Despite the monthly decrease, construction output increased 2.3% in the second quarter of this year, with increases seen in both new work and repair and maintenance, 3.3% and 0.8%, respectively.

Total construction new orders decreased 10.4% (£1,355m) in Q2 this year compared with the first quarter of the year. This represented the largest quarterly fall in construction new orders since Q4 2020 (11.7%).

The annual rate of construction output price growth was 9.6% in the 12 months to June 2022, which was the strongest annual rate of price growth since records began in 2014.

Naismiths director Gareth Belsham describes the reversal in figures as “sharp and painful”.

Belsham says: “After seven straight months of uninterrupted growth, construction crunched into reverse in June – with the sector shrinking faster than any other part of the UK economy.”

“Only the most optimistic observer would dismiss the switch from 1.8% growth in May to a 1.4% contraction in June as being solely down to building work stopping for the extended Jubilee Weekend.”

“Weakening sentiment in the wider economy is starting to squeeze the pipeline of new construction work. The total value of new orders placed shrank by 10.4% (£1.36bn) between the first and second quarters of 2022.”

“Orders from housing developers have now fallen for three quarters in a row, and levels of private sector housebuilding shrank by a bruising 6.1% in June, following a rapid 7.5% expansion in May.”

“Such volatility may be a short-term blip, and for now t.’s still plenty to cheer in the data. New industrial work grew strongly in June and the construction industry as a whole grew by over £1bn in the second quarter compared to the first three months of 2022, marking the fastest quarterly rise since this time last year.”

“But the slowdown in new orders is a worry, as it suggests that after months of enjoying full order books, some builders’ future is looking less rosy.”

“Separate data showed that in England and Wales during the second quarter of 2022 the number of construction firms going to the wall surged to double the level seen during the same period last year.”

“With construction prices rising by 9.6% in the year to June, their fastest level since records began, the combination of inflation and the rising risk of contractors going bust on the job is not a happy one – and once strong investment cases are being tested as increasing numbers of developers pause for thought before committing to build.”