Housing market needs incentivisation and investment as construction output falls, warns RSM

In July 2023, the volume of monthly construction output decreased by 0.5%, following a 1.6% increase in June. The decrease came solely from a 1.3% decrease in repair and maintenance, with new work increasing 0.1%. 

In addition, the main sector contributors to the monthly decrease were private housing repair and maintenance, and private housing new work, which decreased 3.9% and 2.2%. Construction output was flat in the three months to July 2023; due to a 0.3% increase in new work, offset by a 0.4% decrease in repair and maintenance. 

Commenting on the construction output data Kelly Boorman, partner and national head of construction at RSM UK, said: ‘The decrease in construction output reflects the ongoing slowdown in the residential market as housebuilders’ pipeline of activity dries up due to interest rates and inflation. However, while showing a slight decrease, businesses are experiencing this on the ground much more strongly, especially without any short-term visibility of mortgage rates falling. With no signs of improvement in the market, main contractors are really feeling the pinch of weakened demand as their pipeline of new residential work shrinks, coupled with a fall in repair and maintenance. Further delays have also come from heavy rainfall and lower-than-average temperatures in July, adding to the slowdown.

She added: ‘However, as government seeks to accelerate the repair works to school buildings as to avoid disrupting the education of pupils, we will likely see an uptick in construction activity in the coming months as repair works stimulate the market in the coming months. 

‘In the short-to-medium term, this brings welcome news for the industry, given the stabilisation of material prices and availability of labour improving. As a result, this may lead to an uplift in activity in the residential market, as refurbished school facilities may attract families to the local area. The spotlight is also on NHS buildings and universities which require urgent attention, and as such, demonstrates the scale of public sector infrastructure intervention required to ensure adequate education and healthcare facilities.

‘In addition, with affordable housing providers keeping a view on the longer-term volume requirements and starting to increase their output, we will see further stimulation in the market, but this won’t happen overnight, and will require some injection of government incentives and investment.’