CONSTRUCTION OUTPUT saw a decline of 0.6% in the 3 months to November 2023, according to the Office for National Statics’ latest figures. The decrease came solely from a reduction in new work (3.6% fall), as repair and maintenance increased by 3.8%.

Monthly construction output is estimated to have decreased 0.2% in volume terms in November 2023; this follows an upwardly revised decrease of 0.4% in October 2023, with the monthly value in level terms in November 2023 at £15,571 million.

Construction Decline

The decrease in monthly output came solely from a decrease in new work (2.0% fall), as repair and maintenance increased by (2.1%).

At the sector level, three out of the nine sectors saw a fall in November 2023, with the main contributors to the monthly decrease seen in private new housing and infrastructure new work, which decreased 3.9% and 2.0%, respectively.

Anecdotal evidence suggested effects of adverse weather, including heavy rainfall and strong winds in November 2023, led to delays in planned work.

INDUSTRY COMMENT

Concern for the Long Term

Brian Berry, Chief Executive of the Federation of Master Builders

Brian Berry, Chief Executive of the FMB said: “November once again marks another month of decline in construction industry output. While it is positive that the RMI sector, which makes up the backbone of the sector, has seen significant growth of 2.1%, this cannot be a substitute for the delivery of new projects. The Private New Housing sector and the Infrastructure New Work sector have both seen sharp declines, which is deeply concerning for the long-term sustainability of the wider industry.”

“The UK is experiencing a housing crisis, and yet the Government’s response to date has been limited. Despite positive first steps being taken by the Chancellor, the measures announced by the Government so far go nowhere near far enough to tackle the challenges the UK faces in delivering the vast increase in high-quality housing that the country needs. We need to see serious action delivered as an urgent priority, as papering-over cracks can never be a viable solution in the long-term.”

Buyer Demand Recovering

Michael Wynne, Co-founder of the housebuilder Q New Homes, commented: “Housebuilders faced a perfect storm of weak demand and surging input costs during much of 2023, and in November private sector housebuilding contracted by a further 3.9%, more than any other construction subsector.

“But despite the cold conditions on building sites this week, there’s a growing sense that the industry’s dark clouds are finally, slowly, starting to part. The new year began with a flurry of interest rate cuts from high street lenders, and the prospect of more affordable mortgages should help buyer demand recover in 2024. In fact there are signs that this has already begun, with Persimmon, one of the industry’s biggest beasts, reporting a modest uptick in house sales at the end of 2023.

“But with most developers planning 18 months to two years ahead, we’ll need to see a sustained increase in buyer demand before we can declare the worst to be past.

“Meanwhile on the supply side, challenges remain. Skilled tradespeople remain in short supply in many areas, with lead contractors and developers having to work hard to find and retain the people they need. As a result margins are likely to stay squeezed for the foreseeable future.

“Nevertheless there have been some positive movements on building materials. Softer demand has reduced average delivery times and even the costs of several key materials, so on balance the sector is beginning 2024 in a better place than the ONS’s November 2023 data might suggest.

“Looking ahead, 2024 is likely to see intense competition as housebuilders fight for market share as both demand and supply become more free-flowing. To succeed, developers will need to identify not just the right areas, but also the right design features, to win sales in the recovering new-build market. With many buyers focusing not just on upfront cost but also the ongoing cost of ownership, energy-efficient homes are likely to be in high demand.”

More Positive for 2024

Terry Woodley, MD of Development Finance at Shawbrook, commented: “Construction output lagged in November, with both house building and commercial construction struggling to build momentum following sustained high interest rates and rising costs.

“Though December’s figures may be similar, 2024 holds a more positive outlook with interest rates expected to either hold or fall which is encouraging more confidence in the sector. Developers should continue to be resilient and use this as an opportunity to consider where they can make changes to their business strategy to ensure it’s robust against persistent challenges. For example, our research revealed that developers are making changes such as looking to build in different locations (47%), changing building materials (40%) and planning to build different types of properties (39%).”

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