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Output drops to 1.5% below pre-pandemic level

Construction output has fallen to 1.5% below its pre-pandemic (February 2020) level after a 0.2% decline in August, according to the latest official figures.

The Office for National Statistics (ONS) found anecdotal evidence from businesses that product shortages caused by supply chain issues and subsequent price rises were the main reasons for the decline.

In August, new work was flat, while repair and maintenance fell 0.6% on the month before.

That meant construction output was 1.5% (or £214m) below the February 2020 level, while new work was 3.7% below and repair and maintenance was 2.7% above.

Meanwhile, the ONS found a mixed picture when it came to the recovery after covid-19, with infrastructure 45.4% (£852m) above the February 2020 level in August 2021, while private commercial was 26.3% (£656m) below.

Commenting on the figures, Hew Edgar, associate director – policy at CIOB, said: “In order for the industry to return to pre-coronavirus levels we must first see the product and material shortages being addressed. The cost of materials is an uncertain factor for many projects right now which is why many projects continue to be delayed. The stagnation of new work highlights this issue and if it is not addressed we will continue to see a decrease in output for the industry."

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. 

“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.”

Fraser Johns, Beard

“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.”

Mark Robinson, group chief executive at public sector procurement authority Scape, said: “A decline in output highlights a telling loss of momentum across the construction industry, as energy costs, labour shortages and fast-rising material prices continue to paint a concerning picture heading into winter. With attention turning to this month’s Budget and Spending Review, the industry will be considering how best to mitigate these challenges when it is handed the baton to deliver more of the community-focused regeneration needed to deliver on the government’s ‘levelling up’ ambitions.”

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