Calls for industry to unite as ONS figures point to slowdown

Latest News Wed, Oct 13, 2021 8:43 AM

The ONS UK construction output statistics have found that monthly construction output fell 0.2% in volume terms in August.

The level of output is now 1.5% below its pre-coronavirus (COVID-19) pandemic (February 2020) level; new work remained flat this month (0.0%) with repair and maintenance falling (0.6%) on the month.

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.

Overall Britain's economy is now within 0.8% of its pre-pandemic size - a much smaller gap than when the last monthly figures were released thanks to upward revisions to output growth earlier in the year.

Supply-chain shortages were most visible in construction, where output fell for a second month in a row due to rising costs and shortages of steel, concrete, timber and glass.

The economy is also likely to have taken a further hit in September from temporary shortages of fuel at many petrol stations in England - caused by a lack of tanker drivers - and the impact of a surge in natural gas prices.

Fraser Johns, finance director at construction company 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.”

Meanwhile Gareth Belsham, director of the national property consultancy and surveyors Naismiths, warned that the slowdown has turned into a slide.

“The construction industry is officially contracting again,” he continued. “On a quarterly basis, output is down by 1.2%, the first such fall since the dark days of mid-2020.

“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.

“The ONS data reveals that in August, 36% of builders had to change suppliers, or were unable to source the materials, goods or services they need from within the UK.

“This is far higher than the proportion of businesses in other industries reporting similar problems, suggesting that construction has been hit harder than most by the perfect storm of staff and material shortages.

“The slowdown is particularly alarming in private housebuilding, which was a star performer during the boom months of the first half of 2021, but saw levels of new work shrink by 7.5% in July and managed growth of only 1% in August.

“While sentiment across the industry remains broadly upbeat, the supply chain problems are inexorably stifling growth. With this latest fall in output, the industry has shrunk to nearly a quarter of a billion Pounds less than its pre-pandemic size.

“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.”

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