August Construction Output Slows as Shortages Stifle Growth

August construction output

CONSTRUCTION OUTPUT IN August 2021 fell 0.2% bringing the level of output now 1.5% below the pre-coronavirus pandemic level of February 2020, falling by £214 million.

The latest figures from the Office for National Statistics show new work remained flat this month with no growth and was recorded at 3.7% (£348 million) below the February 2020 level.

Meanwhile repair and maintenance fell by 0.6% on the month and was measured at 2.7% (£135 million) above the February 2020 level.

August construction output 2

August Shortages and Price Rises

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.

Mixed Post-Pandemic Recovery

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

Quarterly Fall

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%.

INDUSTRY COMMENT

Pull Together

Fraser Johns, finance director at Beard
Fraser Johns, finance director at Beard

Fraser Johns, finance director at Beard, said: “With the reduction in output in August marking the first quarterly decline since July 2020, this is clearly not just a minor blip, and marks a real challenge for the construction industry to overcome.

“A lot has been made of the supply chain issues and subsequent price rises and rightly so. Client confidence has certainly been impacted, with inflationary price pressures and supply shortages at the root of hesitancy to green light projects in the current environment.

“After the sharp recovery in the past year, the industry needs to pull together to ensure this doesn’t become a long-term decline.  To overcome it, contractors must be proactive, and regular collaboration with suppliers is fundamental to all projects.

“Multi-step procurement processes may become the norm, and this should help absorb the extended lead-in times for certain materials, and mitigate the risk of disruption to projects on the ground.

“Even with these precautions in place, it looks like the road to recovery will be a difficult one until the industry can solve the shortages issue.”

Downward Spiral

Clive Docwra
Clive Docwra, Managing Director of McBains.

Clive Docwra, Managing Director of property and construction consultancy McBains, said: “Today’s figures are proof that the construction sector is in a downward spiral, as this is the fifth successive monthly fall in output.

“New work remains flat in due in large part to a continuing shortage of essential products such as steel, concrete and timber.  Steel prices in particular are now almost 75% higher than they were in August 2020.

“The outlook over the remainder of the year looks ominous too.  The triple whammy of continuing supply chain issues, together with a lack of HGV drivers to deliver the materials that are available, means some developments being delayed, and the fuel and energy crisis is also likely to add to project costs.

“Skills shortages are also a concern, so the government should grant an exemption allowing skilled foreign construction workers to apply for work visas, as they did to address the shortage of HGV drivers.”

Shortages Stifling Growth

Gareth Belsham
Gareth Belsham National Head of Building Consultancy, Naismiths

Gareth Belsham, director of property consultancy and surveyors Naismiths, commented: “The slowdown has turned into a slide.

“The construction industry is officially contracting again. This is the clearest sign yet that construction’s chronic supply problems aren’t just speed bumps – in many cases they’re proving to be insurmountable obstacles that are forcing projects to slam on the brakes.

“While sentiment across the industry remains broadly upbeat, the supply chain problems are inexorably stifling growth.

“This data, which was recorded before September’s fuel crisis, could also be a sign of worse to come. Last month the lack of drivers, and a lack of fuel, brought many supply chains to a near standstill.

“Construction has weathered far worse than this, but where you have contractors having to turn work away because they simply can’t deliver projects through a lack of people and materials, things are far more serious than teething problems.”

>> Read more about shortages and price rises in the news

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