Construction returns to growth in January

Latest estimates from the Office for National Statistics (ONS) show that the value of new construction work in the three months to January 2024 fell by 4.5%.

Repair & maintenance, on the other hand, increased by 4.0%.

Overall, therefore, the ONS estimates that construction output decreased by 0.9% in the three-month period.

New infrastructure work was the most significant faller, down 9.3%. Private housing new work fell 5.2%.

However, after three consecutive monthly falls, monthly construction output is estimated to have increased 1.1% in volume terms in January 2024, to reach a value of £15,422m.

The increase in monthly output came from increases in both new work (1.1%) and repair & maintenance (1.2%).

At the sector level, six out of the nine sectors saw a rise in January 2024; the main contributors to the monthly increase were private new housing, and non-housing repair and maintenance, which increased 2.6% and 1.9%, respectively.

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Commenting on the estimates, Clive Docwra, managing director of property and construction consultancy McBains, said: “After three consecutive months of falling output, the industry will welcome January’s return to growth.

 “The 2.6% increase in private housing is particularly encouraging given the performance of this sector over the last few months.  The hope is that if mortgage rates ease, it could lead to increased residential demand which in turn could trigger a bigger turnaround in housebuilding numbers.

“But whether the increase in January turns out to represent the green shoots of wider recovery or a blip remains to be seen.  Growth over the longer term is estimated to have decreased 0.9% in the three months to January 2024, highlighting that conditions remain unsettled for many industry sectors.”

Scott Motley, head of programme, project and cost management at Aecom, said: “January’s increase in output raises hopes that the construction sector is turning a corner despite the ongoing challenges in the housebuilding market, which has a significant impact on overall performance.

“Inflationary issues have receded since the start of the year, and most long-term cost issues within contracts have either been renegotiated or worked through. That said, the cost of borrowing remains heightened at a time when we’re seeing tender activity becoming more competitive in some subsectors.

“Most contractors remain reasonably confident in their financial health but, the fact that this is being billed as a year for modest growth suggests some firms will struggle as we head into the spring. Indeed, many will be watching carefully as house-builder earnings season – a bellwether for others – gets under way this week.”

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