March construction output hits record high, but business concerns remain, says RSM

In March 2022, the volume of monthly construction output increased by 1.7 per cent (£14,994m), following a 0.3 per cent decrease in February 2022, according to the latest Office of National Statistics figures. This is a record level of monthly growth since records first started in January 2020, with private housing repair and maintenance (5.8 per cent) and private commercial new work (4.0 per cent) the main contributors.

The level of construction output in March 2022 was also 3.7 per cent higher than pre-pandemic levels of growth seen in February 2020. In terms of quarterly growth outside of the pandemic, an increase of 3.8 per cent in Q1 (January to March) is the strongest quarterly growth since Q1 2017 (3.9 per cent). 

Commenting on construction output data for March 2022, Kelly Boorman, partner and national head of Construction at RSM UK, said: ‘The latest figures show a record high for monthly construction output (1.7 per cent), due to the ongoing challenge of increasing material prices, with contractors accelerating project start dates to avoid further inflationary costs and supply chain shortages. The storms in January and February also contributed to monthly growth in March, following delayed start dates, labour shortages and exacerbated pressures on the construction pipeline. 

‘However, the 2.6 per cent (£346m) decrease in new orders in Q1 2022 compared to Q4 2021 is indicative of the delays in procurement, as businesses continue to face challenges managing pricing of materials and labour scheduling, creating concerns for fixed price contracts, more scrutiny on delays and damages clauses and shorter terms for material repricing. 

‘Looking ahead, the construction industry will likely continue to see growth in output, with commercial tailwinds remaining as contractors manage the pent-up demand post-Brexit and pandemic, heightened by accelerated project start dates. However, despite the pipeline of work and contractors having autonomy over which projects they take on, market uncertainty remains, due to a number of factors including the procurement of labour and costs, preservation of margins, liquidity of the supply chain and inflation.’