ONS: Construction output falls 0.2%

Jake Carter

October 13, 2021

build building

Monthly construction output fell 0.2% in volume terms in August 2021 with the level of output now 1.5% below its pre-coronavirus pandemic level, according to data from the Office for National Statistics.

New work remained flat this month while repair and maintenance fell 0.6% on the month; anecdotal evidence from businesses continued to suggest that product shortages caused by supply chain issues and subsequent price rises were the main reasons for the decline.

The level of construction output in August 2021 was 1.5% (£214m) below the February 2020 pre-pandemic level; new work was 3.7% (£348m) below the February 2020 level, while repair and maintenance work was 2.7% (£135m) above the February 2020 level.

The recovery to date, since the start of the pandemic, is mixed at a sector level, shown with infrastructure 45.4% (£852m) above and private commercial 26.3% (£656m) below their respective February 2020 levels in August 2021.

Alongside the monthly fall in August, construction output fell 1.2% in the three months to August 2021, the first three-monthly fall since July 2020, driven by a fall in repair and maintenance of 4.7%.

Andy Sommerville, director at Search Acumen, said: “The pain of supply issues across large swathes of the UK economy is nothing new to the housing market, where demand and supply have been disconnected for almost as long as memory serves.

“This latest dataset reflects continuing stresses and strains caused by additional supply chain issues in the construction industry. Strong levels of buyer demand continue to outstrip the sector’s capacity to keep up with building homes at a pace that can resolve the affordability crisis.

“Private housebuilding remains nearly 4% down on pre-pandemic levels while public housebuilding has fallen almost 30%.

“We’re seeing the emerging realities of Brexit combined with the lingering impacts of the pandemic at play. The shortage of raw materials and labour have derailed the daily lives of thousands of Brits, and threaten to put additional barriers in the way of homeownership ambitions as construction output dips and builders struggle to continue operations.

“Housebuilders and homebuyers alike will be looking to government for more than just a rebrand of the Ministry for Housing, Communities and Local Government to address the issues of levelling up the property market.

“While planning reforms are being taken back to the drawing board, expectations will focus on the Budget in a fortnight’s time, but the strain on public finances may rule out the kind of show-stopping housing announcements that have landed in previous years.”

Stuart Law, chief executive of the Assetz group, added: “While overall construction output fell by 0.2% in August, the private housebuilding sector has seen a particular drop in new work with a decrease of 6.6% over the last three months.

“With the ongoing impact of post-Brexit trade and shortages of raw materials and labour now combined with a nationwide energy crisis, housebuilders are facing a challenging set of market conditions, and this is likely to lead to further house price increases at a time of such substantial demand to move home.

“However, the current environment does present some opportunities for forward-thinking developers. With the price of energy set to soar for consumers over the winter and beyond, the need for more energy-efficient homes has never been more clear or urgent.

“As prices rise, energy efficiency will become a much more prevalent concern for homeowners, creating opportunities for specialist, SME housebuilders who are leading the way in terms of innovative, factory-built eco homes.

“As demand for these types of homes increases, they will make an even more meaningful contribution to the national construction output.

“While we’ve continued to see robust appetite from such housebuilders looking to meet the nation’s rapidly changing housing needs – receiving hundreds of millions of pounds worth of loan applications to fund projects over the last few months.

“Now more than ever they will need broader government and industry support if they are to deliver what is needed of them at speed. Key to this is how projects can be financed in a challenging market, without the support of traditional lenders.”

Sign up to our daily email