Increase in March construction output does not reflect pain for housebuilders as interest rates rise
12 May 2023
In March 2023, the volume of monthly construction output increased 0.2%, following an increase in new work (0.7%), offset slightly by a decrease in repair and maintenance work (0.6%).
Although total construction output also saw an increase of 0.7% in the three months to March 2023, total new work saw a fall of 1.9%, highlighting the ongoing challenges for housebuilders amidst the cost-of-living crisis.
Commenting on the construction output data Kelly Boorman, partner and national head of construction at RSM UK, said: ‘While we’ve seen a small increase in the volume of monthly construction output, the three months to March 2023 has seen a decline, which will be exacerbated by yesterday’s decision by the Bank of England’s to raise interest rates for the 12th consecutive month. This, coupled with the ongoing slowdown in the private housing sector since the end of 2022 is concerning, suggests that headwinds remain.
‘For public housing, one of the challenges we currently have is the demand for affordable housing and the constant shortfall – with the gap between the two continuing to grow as housebuilders cannot meet demand quickly enough. There is also the challenge of infrastructure projects coming back to the market in certain regions, seen most significantly in Scotland at the moment due to a changing government.
‘However, in the private housing sector, we expect to see some improvement in the coming months in response to the return of the 100% mortgage and stabilisation of energy prices. As such, there is some optimism in the industry about procurement processes and market prices, supported by the stabilisation of materials and the return of migrant labour, ensuring continuity in pipelines.
Although total construction output also saw an increase of 0.7% in the three months to March 2023, total new work saw a fall of 1.9%, highlighting the ongoing challenges for housebuilders amidst the cost-of-living crisis.
Commenting on the construction output data Kelly Boorman, partner and national head of construction at RSM UK, said: ‘While we’ve seen a small increase in the volume of monthly construction output, the three months to March 2023 has seen a decline, which will be exacerbated by yesterday’s decision by the Bank of England’s to raise interest rates for the 12th consecutive month. This, coupled with the ongoing slowdown in the private housing sector since the end of 2022 is concerning, suggests that headwinds remain.
‘For public housing, one of the challenges we currently have is the demand for affordable housing and the constant shortfall – with the gap between the two continuing to grow as housebuilders cannot meet demand quickly enough. There is also the challenge of infrastructure projects coming back to the market in certain regions, seen most significantly in Scotland at the moment due to a changing government.
‘However, in the private housing sector, we expect to see some improvement in the coming months in response to the return of the 100% mortgage and stabilisation of energy prices. As such, there is some optimism in the industry about procurement processes and market prices, supported by the stabilisation of materials and the return of migrant labour, ensuring continuity in pipelines.
