Increase in February construction output does not reflect slowdown in housebuilding activity

In February 2023, the volume of monthly construction output increased 2.4%, following a 1.7% fall in January 2023, with the rise coming from increases in repair and maintenance (4.5%) and new work (1.1%).

Construction output also saw an increase of 0.9% in the three months to February 2023 – the sixth period of consecutive growth in the three-monthly series, with main positive contributors non-housing repair and maintenance (5.5%) and infrastructure new work (2.8%). However, in this three-month period, private new housing saw a 4.4% fall, despite the monthly increase, indicating there has been a slowdown in housing in recent months as households navigate the cost-of-living crisis.

Commenting on the construction output data Kelly Boorman, partner and national head of Construction at RSM UK, said: ‘Despite the uptick across monthly and three-monthly construction output volume in February, the sector continues to operate in very tough conditions, so this latest increase may suggest a bounce back from the fall in January to the weakest level of monthly growth since June 2022.

‘The fall in private new housing is more reflective of the challenges faced by the sector as homeowners continue to lose confidence in mortgage rates and availability and soaring energy costs, leading them to invest in repair and maintenance in their current properties, rather than moving. Government schemes to address the cost-of-living crisis and energy prices by improving households’ energy efficiency are also stalling activity in the housing market, which, coupled with further house pricing falls anticipated over 2023 demand has seen a downturn. Further tensions in supply chains, labour shortages and squeezed margins, are also adding to the overall slowdown in housebuilding.’

She added: ‘We’d anticipate seeing some improvement in housebuilding activity towards the end of Q3 2023, as the government’s plans to address labour issues and boost sector growth by loosening foreign worker rules comes into fruition. In addition, as material prices start to stabilise, margins will start to improve which may in turn also lead to less volatility in the supply chain, meaning the sector will be better equipped to navigate future pipelines.’