At the start of 2023, the construction industry showed positive signs of growth, with February construction output bouncing back by 2.4%. This is a welcome relief after a sluggish end to 2022. According to recent data from the Office for National Statistics (ONS), the construction sector has been steadily improving since last year, despite the ongoing challenges posed by the pandemic.
Key Highlights
- Construction output rose by 2.4% in February 2023, following a 1.8% fall in January.
- The three-month on three-month growth rate was 1.9%, the highest level since July 2022.
- The private housing sector saw the strongest growth, with a 5.2% increase in output.
- The infrastructure sector also showed significant growth, with output rising by 3.8% in February.
The increase in construction output is a positive sign for the UK economy, and the industry as a whole. The strong growth in the private housing sector is particularly encouraging, as this is an area that has been struggling in recent years due to a lack of investment and high demand. The government’s recent efforts to boost housebuilding, through initiatives such as the Help to Buy scheme and the creation of a new Housing Infrastructure Fund, are starting to have a positive impact.
Meanwhile, the growth in infrastructure output is also good news for the industry. This is an area that has been neglected in recent years, with a lack of investment leading to significant delays in major projects. However, the government’s commitment to increasing infrastructure spending is starting to pay off, with projects such as HS2 and Crossrail showing signs of progress.
Mike Hedges, director at Beard Construction, said: “Like many other key sectors, construction has been unable to avoid the challenges of the last nine months or so. However, it is positive to see the landscape beginning to improve with an increase in output and the highest monthly value seen since January 2010.
“While it’s encouraging to see a marginal increase in new work, we shouldn’t be surprised to see repair and maintenance continuing to lead the recovery effort. This could in part reflect customers being wary about committing to large new-build construction projects but could also reflect the emerging direction of trying to maximise value from existing assets, reducing waste and preserving embodied carbon.
“Looking beyond February at the three-month picture though, infrastructure new work was a key contributor to growth. This certainly mirrors the broad portfolio of projects we’re working on and the tender opportunities we’re currently seeing at Beard.
“It’s further proof that firms need to remain agile and pivot toward more resilient sectors that will continue to provide opportunities, such as specialised infrastructure projects for local and central government. This is especially true for those firms reliant on residential building or housebuilding, which continues to be challenging with higher mortgage rates and borrowing costs stifling new-build demand. It will be encouraging to see the challenges on these sectors ease later this year with the slowing of interest rate increases.”
However, despite the positive signs, the construction industry still faces significant challenges. The ongoing impact of the pandemic continues to be felt, with supply chain disruptions and a shortage of skilled workers affecting many companies. In addition, rising material costs and inflation are putting pressure on margins, making it more difficult for companies to invest in new projects.
Overall, the increase in construction output in February 2023 is a positive sign for the industry and the wider economy. While challenges remain, the government’s commitment to boosting investment in housing and infrastructure is starting to have a positive impact. Companies that are able to navigate the current challenges and position themselves for growth in these key sectors are likely to see significant benefits in the coming years.
