September construction output continues upward trend, but sector should prepare for scale down

In September 2022, the volume of monthly construction output increased by 0.4%, the third consecutive monthly growth following small upward revisions in August and July 2022. September 2022 shows the highest level of construction output (£15,125 million) since records began in January 2010.

The increase in September 2022 came from an uptick in new work (0.6%) and repair and maintenance (0.2%). New orders increased 6.4% (£774 million) in Q3 2022, compared to Q2 2022, with private commercial new orders rising 27.7% (£832 million) driving much of this quarterly growth.

However, while the industry is showing signs of growth for Q3 2022, the upward trend is likely to dip entering Q4 and into 2023 as the recession starts to bite.

Commenting on the construction output data Kelly Boorman, partner and national head of Construction at RSM UK, said: ‘The latest ONS figures show that as monthly construction output increases for the third consecutive month, the industry has not seen a slow down as soon as anticipated. Private commercial orders have driven much of the activity for Q3 2022, as businesses uphold their commitment to finishing work and have decided to ‘get on with it’ while they have the labour to absorb it. Similarly, the rise in repair and maintenance work reflects the demand in public housing as contractors prepare buildings for the winter months.

‘Despite the encouraging signs of growth in September and Q3 2022, challenges remain for the sector as the monthly GDP fell 0.6% in September, marking the first signs of the recession. This, coupled with interest rates seeing the biggest rise in more than three decades, is likely to dampen future output as the supply chain and subcontracting is strained. With the industry also keeping an eye on the new EPC requirements, which come into effect in April 2023, we anticipate further financial investment in this area, which will leave businesses balancing the books as projects become more expensive and fixed-price contracts add another layer of financial pressure preventing the supply chain passing on inflationary rises.

‘Although the latest leadership changes have brought about some political stability, businesses will be hoping next week’s Autumn Budget brings further clarity and long-term financial investment to secure infrastructure, maintain the pipeline of work and ensure accessibility to labour.’