A Bright Light On The Economic Gloom As Construction Work Increases

11th November 2022

Construction output in Great Britain: September 2022, new orders and Construction Output Price Indices, July to September 2022.

Short-term measures of output by construction industry in September 2022, contracts awarded for new construction work in Great Britain and a summary of the Construction Output Price Indices (OPIs) in the UK for Quarter 3 (Jul to Sept).

Monthly construction output increased 0.4% in volume terms in September 2022, which is the third consecutive monthly growth following small upward revisions, to 0.6% in August 2022 and 0.2% in July; September 2022 shows the highest level of construction output (£15,125 million) since records began in January 2010.

The increase in monthly construction output in September 2022 came from increases seen in both new work (0.6%) and repair and maintenance (0.2%) on the month.

At the sector level, 5 out of the 9 sectors saw a rise in September 2022, with the main contributors to the monthly increase seen in public housing repair and maintenance and infrastructure new work, which increased 11.3% and 2.8%, respectively.

The level of construction output in September 2022 was 4.0% (£575 million) above the February 2020 pre-coronavirus (COVID-19) pandemic level. New work was 0.3% (£29 million) below its February 2020 level, while repair and maintenance work was 12.0% (£604 million) above the February 2020 level.

Alongside the monthly increase, construction output saw an increase of 0.6% in Quarter 3 (July to Sept) 2022, although this is the weakest quarterly growth since Quarter 3 2021 (1.1% fall); the increase came solely from growth in new work (2.4%) as repair and maintenance saw a decrease (2.2% fall).

Total construction new orders increased 6.4% (£774 million) in Quarter 3 2022 compared with Quarter 2 (Apr to Jun) 2022; this quarterly growth came mainly from private commercial new orders, which rose 27.7% (£832 million).

The annual rate of construction output price growth was 10.1% in the 12 months to September 2022; this has slowed slightly from the record annual price growth in May 2022 (11.5%).

Estimates for September 2022 are affected by the bank holiday for the State Funeral of Her Majesty Queen Elizabeth II, where some businesses may have closed or operated differently on this day.

Construction output in September 2022
Monthly construction output increased 0.4% in September 2022. This is now the third consecutive increase in monthly construction output since June 2022 (0.6% fall), and is the highest level of construction output (£15,125 million) since records began in January 2010.

Prices are still historically high, however the annual rate of growth for building materials has slowed from its May 2022 high point in the series (Figure 5), and previous availability issues around sourcing products have eased. Also order books remained strong for businesses, as illustrated with new orders in the construction industry increasing 6.4% in Quarter 3 (July to Sept) 2022, and now being 11.5% above its pre-coronavirus (COVID-19) pandemic level in comparison with Quarter 4 (Oct to Dec) 2019.

Anecdotal evidence received from returns for our Monthly Business Survey for Construction and Allied Trades (MBS) and our Business Insights and Conditions Survey (BICS) continues the narrative around the increased prices for certain construction products. As in previous months, increased costs of products, most notably concrete, plaster, bricks, sand, gravel and asphalt-related products are mentioned. These high prices coupled with the loss of a working day because of the Bank Holiday for the funeral of Queen Elizabeth II are likely to have lessened growth in September 2022.

Month-on-month construction output growth in September 2022
The 0.4% rise in construction output in September 2022 represents an increase of £66 million in monetary terms compared with August 2022, with 5 out of the 9 sectors seeing an increase on the month.

Public housing repair and maintenance, and infrastructure new work were the largest contributions to the monthly increase in September 2022, increasing 11.3% (£63 million) and 2.8% (£63 million), respectively.

Anecdotal evidence gathered from businesses responding to MBS, for Construction and Allied Trades, and BICS suggested some new projects were continuing as costings were agreed prior to the recent price increases and as such the construction firms were having to absorb these. Some businesses have also mentioned they have seen an increase in work load during this time because of a rise in demand for more efficient energy usage.

Quarter-on-quarter construction output growth in Quarter 3 2022
Alongside the monthly increase, construction output rose to 0.6% (£276 million) in Quarter 3 2022. This is the weakest quarterly growth since Quarter 3 2021, which fell 1.1%.

This quarterly increase came solely from an increase seen in new work (2.4%) as repair and maintenance saw a decrease (2.2% fall).

Of the 9 sectors, 5 saw an increase in Quarter 3 2022, with the largest contributors being private commercial, and private housing new work. These sectors increased 5.0% (£269 million) and 2.4% (£242 million), respectively.

Figure 4 illustrates the slowing in the rate of overall construction output growth since the start of 2022. This is coming from repair and maintenance activity, which decreased 2.2% in September 2022. In September 2022, all 3 sectors within repair and maintenance saw decreases.

New orders in the construction industry in Quarter 3 2022
Total construction new orders increased by 6.4% (£774 million) in Quarter 3 2022 compared with Quarter 2 2022. This partly reverses quarterly falls seen in the first half of 2022 (6.4% and 3.5% respectively). See our New orders in the construction industry dataset for more detail.

Other new work new orders (that is, non-housing) was the main contributor to quarterly increase in Quarter 3 2022 as it rose 11.6%. This mainly came from private commercial new orders, which increased 27.7% (£832 million). Specifically within private commercial, new orders for offices increased to above the £2 billion mark again, after a large quarterly decrease in Quarter 2 2022. Project-level data suggests that a large number of businesses are continuing to carrying out office refits and refurbishments as workers return to the office.

Total construction new orders in Quarter 3 2022 are now 11.5% above it pre-pandemic level (Quarter 4 2019) with private new housing the only sector still to recover.

Read the full ONS report HERE