Construction activity sinks below pre-Covid level | news


Construction activity fell back below pre-Covid levels in June after the third month in a row that production was down.

The latest data from the Office for National Statistics (ONS) showed that monthly construction output rose 1.3% or 178 million in June 2021.

The drop means June production was 0.3% or £ 39m below pre-February 2020 coronavirus pandemic levels. New work was 2.1% or £ 188m below this level while repairs and maintenance were 3.1% or £ 149m above despite the month.

The ONS update said the responses to its monthly poll indicated that shortages in construction products, particularly wood, steel, cement and tile, contributed to recent price hikes that depressed production numbers in June.

Mark Robinson, Scape’s group chief executive, said the June production decline, despite the continued rebound in order books in the first half of the year, was a sign that material and labor shortages were driving costs up and extending project lead times.

He said: “Inflation is likely to continue to rise at least until the end of the year, which could detract from the impact of increased government spending as it aims to modernize infrastructure and fuel a construction super cycle.

“Support for SMEs in the coming months will be crucial to mitigate negative long-term effects – especially for companies with limited purchasing power or weaker order books after Covid.”

Infrastructure was the only new sector of work to have output above pre-Covid levels in February 2020, with activity 30.9% or £ 562 million above output.

Figure 1_ The monthly index shows that the level of construction production in June 2021 fell below the level before the February 2020 pandemic

Figure 2_ Infrastructure was the only new employment sector where production levels in June 2021 were higher than in February 2020

But in contrast to the monthly figures, quarterly construction output rose 3.3% in the second quarter compared to the first quarter – both new construction and repairs and maintenance rose by 3.9% and 2.3%, respectively.

Total construction orders rose 17.6%, or just under £ 2 billion, in the second quarter compared to the first three months of the year.

Total incoming orders also recovered above the pre-pandemic level for the first time and were 1.6% or GBP 214 million above the level of the first quarter of 2020.

Simon Rawlinson, Partner at Arcadis, said, “The recent orders for the second quarter are strong across the board and confirm the sustainability of the recovery from Covid-19.

“In particular, contractors from the logistics and office sectors are now confronted with full order books. There will be other challenges in terms of material and manpower availability, but this is a great position for the industry to move into the second half of 2021. “

New orders rose 3.9% or £ 983 million in the second quarter, largely due to infrastructure, which grew 15.9% or £ 926 million.

The ONS said anecdotal evidence suggested that the mix of a strong pre-pandemic orders pipeline and the ability to more easily implement social distancing measures on larger open-air sites has made infrastructure work relatively well since the Covid-19 hit.

Repairs and maintenance also rose 2.3%, or £ 345 million, over the same period. The largest contributor was a 5.2% or £ 401m increase in repair and maintenance for non-residential buildings.

The ONS construction earnings price index rose 3.4% in the twelve-month period to June, the strongest annual growth rate in producer prices since August 2019.

Looking at the bigger picture, the ONS said that the decline in construction output from peak to trough in 2020/21 was significantly larger than in the 2008/09 recession, but that the recovery was much faster in the second half of 2020 was as in the hardware store after the financial crisis.

Figure 8_ Construction prices rose sharply in 2021, both for new buildings and for repairs and maintenance

Figure 6_ Compared to the recession from 2008 to 2009, the pandemic continued to recover faster for all work in the construction industry



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