Construction output falls 5.9% in first quarter of 2020

The Office of National Statistics (ONS) has announced that the first quarter of 2020 saw the largest quarterly fall in construction output since the second quarter of 2012. However, new orders increased nearly 12% indicating that recovery from a weak end to 2019 had begun.

Data released today has revealed that construction output fell by 5.9% in March 2020. This was driven by a 6.2% decrease in new work and a 5.1% decrease in repair and maintenance. All of these decreases were the largest monthly falls on record since the monthly records began in January 2010.

However, new orders grew by 11.8% in Quarter 1 2020 compared with Quarter 4 2019; this rise was because of increases in both all other work and new housing, which rose 11.5% and 12.5% respectively.

Clive Docwra, Managing Director of leading construction consulting and design agency McBains, said: “Today’s figures confirm the construction industry is facing its most challenging period since the 2008 financial crisis.

“While the Prime Minister has identified the industry as one that can now return, construction work cannot just simply pick up again because many supply chains – not only in the UK but also in the Far East – are still static as a result of the pandemic.

“The industry is also facing short-term labour shortages because many foreign construction workers that returned home as coronavirus took hold are reluctant to return given the impending Brexit. And there are challenges in firms operating while maintaining social distancing.

“Many small businesses in the sector are facing continuing pressure on their finances from the current suspension of projects, so the coronavirus loan process needs to be streamlined andfaster decisions need to be made on loan approvals too.”

Brian Berry, Chief Executive of the Federation of Master Builders, said: “Construction makes a significant contribution to our economy, so when output falls so does the the economy. The Government’s green light for for construction sites to re-open safely in England is very positive but it’s going to be a hard slog to get activity back to where it was.

“To reverse the decline in output a clear plan for recovery is needed that specifically supports local builders. Small to medium-sized (SME) construction firms operate across the country, and create local training and employment opportunities. They are central to achieving the Government’s levelling-up agenda, and can help stimulate local growth in the long-term. This should be delivered through a national retrofit programme that sets out a plan for upgrading our existing homes. This should be underpinned by a temporary cut in VAT to stimulate demand for these works.”

The decrease in new work (6.2%) in March 2020 was because of falls in all new work sectors; private new housing and private commercial were the largest contributors, falling by 6.4% and 7.1% respectively.

The decrease in repair and maintenance (5.1%) in March 2020 was because of falls in all repair and maintenance sectors; the largest contributor was private housing repair and maintenance, which fell by 8.6%, the largest month-on-month fall on record.

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