New construction output figures published by the ONS today (13 September) show a decline for July 2023 following two months of growth
Monthly construction output for July is estimated to have decreased by 0.5% in volume. This decline follows a 1.6% increase in June 2023, and the total value of construction in July 2023 was £15,546m.
Construction output has fallen across a range of sectors
The decrease in monthly output can be attributed to a 1.3% reduction in repair and maintenance activities, while new construction work saw a slight 0.1% increase during the same period.
Looking at specific sectors, five out of the nine sectors experienced a decline in July 2023. The main causes of these declines were poor performances across the private housing repair and maintenance sector. This sector saw a 3.9% drop, and new construction work in private housing decreased by 2.2%.
Anecdotal evidence suggested that heavy rainfall and lower-than-average temperatures in July 2023 had led to delays in planned construction projects. There were suggestions of an ongoing slowdown in the housing sector.
The UK economy is predicted to struggle
The decrease in construction output is reflective of a wider decline in the economy. The UK economy shrank in July by 0.5% after heavy industrial action and severe wet weather.
Capital Economics has warned that the UK might already be in recession. Paul Dales, the chief UK economist, has warned July’s performance will mean the Bank of England’s forecast of 0.4% growth in the third quarter of 2023 is now unlikely.
As well as the monthly decline, overall construction output remained unchanged in the three months leading up to July 2023. This stability came from a 0.3% increase in new construction work, offset by a 0.4% decrease in repair and maintenance activities during that period.
“Following the positive June figures, which showed a return to growth after two successive monthly falls in output, the construction sector will feel it’s back to square one with today’s news,” commented Clive Docwra, managing director of property and construction consultancy McBains.
“A significant factor is high mortgage rates denting demand for new homes, reflected by the continued sluggish performance in volume housebuilding. My guess is that we could see more private housebuilders forging closer partnerships with local authorities and housing associations to pursue mixed tenure models such as social housing and shared ownership,” he concluded.
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