Construction sees pipeline growth, but fall in infrastructure reinforces need for mobilisation

Quarterly construction output decreased of 1.3% in Q4 2023 in comparison to Q3 2023. The fall came solely from a 5% decrease in new work. The volume of monthly construction output also decreased 0.5% in December, continuing the three-month downward trend. The decrease in monthly output came solely from a decrease in new work (1.1%). 

In addition, the main sector contributors to the monthly decrease were seen in infrastructure new work, and private housing repair and maintenance, which decreased 6.4% and 1.1%, respectively.

Commenting on the construction output data Kelly Boorman, partner and national head of construction at RSM UK, said: ‘Despite the latest monthly and quarterly falls for construction output in December, the industry remains cautiously optimistic due to committed spend on infrastructure projects, with businesses also reporting that the pipeline has grown due to new projects being awarded. Additionally, with mortgage rates falling sharply in recent weeks, growth in mortgage applications will help to restimulate the housing market, which had reached its lowest point last year. The industry is also eagerly awaiting interest rate drops which, having now reached their peak, are expected to fall in Q3 2024, which will further bolster the housing market. 

‘However, the setback is that industry needs to see mobilisation of these projects, not just commitments and awarding of contracts. The sharp decrease in infrastructure new work in Q4 2023 (6.4%) highlights the need for mobilisation, and with a budget and general election on the horizon, businesses will be hoping the latest infrastructure spend announcements will be more than just a government pipe dream.’ 

She added: ‘Moving into 2024, businesses remain cautious, especially as construction saw the highest number of insolvencies out of any UK sector in 2023, with a further rise in Q4 2023, reflecting 
the challenges for businesses managing a strained supply chain while focusing on contracts and pricing. The pace of recovery in construction is important given the industry’s resource and supply chain challenges. Rising insolvencies and fast-paced growth would be detrimental, so businesses will be approaching contracts with steady growth in mind, in order to avoid stretching limited resource, overtrading, and collapsing the supply chain.’