11 August 2023
In June 2023, the volume of monthly construction output increased by 1.6%, following two months of slight decreases in April and May. The increase came from new work (2%) and repair and maintenance work (1.1%).
In addition to the monthly increase, quarterly construction output increased 0.3% in Q2 2023, compared to Q1 2023, with monthly output in June driving the uptick. However, total construction new orders decreased 7.1% (£786m) in Q2 compared to Q1, a sign of headwinds in Q3 2023.
Commenting on the construction output data Kelly Boorman, partner and national head of construction at RSM UK, said: ‘The slight uptick in construction output reflects the uplift in infrastructure new work (4.7%), given there is still some infrastructure contracts that continue to be secured, while delayed contracts start to come into fruition, which is propping up the industry.
‘However, it’s certainly not all rosy, as private housing is seeing a continued slowdown, accelerated by the Bank of England’s rising interest rates, which in turn are having a knock-on impact on mortgage costs, causing further unsettlement in the market. Households have less disposable income due to the cost of living and interest rates, meaning homeowners are stuck in their current properties and unable to move, also with less disposable income to spend on repairs due to rising mortgages, which explains the additional fall in private repair and maintenance work (0.7%). With interest rates likely to increase further and mortgage rates set to jump even higher, demand for housebuilders will continue to weaken in Q3 2023.’
She added: ‘It’s a similar story for housing associations, who do not have the finances to repair their existing properties, as seen in the fall in public repair and maintenance work (2.4%), which is concerning given the demand for affordable housing is growing significantly and will continue to do so. As the housing market starts to plummet in the coming months, everyone will be waiting with bated breath to see what the government will do to stimulate activity in the private sector and ensure a strong supply of affordable housing.’