Construction bucks economic trend with continued growth

Construction output rose slightly in September despite an overall fall in UK gross domestic product (GDP).

The industry’s output rose 0.4% according to the Office for National Statistics, the third consecutive monthly of growth for the sector as the country heads towards recession.

Construction was the odd one out of the UK’s major sectors, with services stagnating and manufacturing down 2.3%.

The 0.6% fall in GDP seen across the economy in September was sharper than the 0.1% fall of the prior month.

The Bank of England recently estimated that the third quarter saw the UK enter a recession that could last until mid-2024.

The growth in construction’s output rate was slightly slower than the (upwardly revised) 0.6% recorded for August, and was driven mainly by infrastructure and public housing repair and maintenance, which increased 2.8% and 11.3% respectively.

According to anecdotal evidence from the monthly business survey for construction and allied trades, the cost of living crisis continues to be a major factor in the decline of private housing repair and maintenance, for which output dropped 1.1% in September.

Simon Rawlinson, Arcadis, said the figures were a sign that demand “remained resilient right up until the turmoil of September 2022” and that this was “a good foundation for the industry to enter a slowdown”.

“Markets will undoubtedly slowdown but a strong 2022 has at least provided a solid cushion of workload,” he said.

David Savage, head of construction at Charles Russell Speechlys noted that this was a “backwards facing view” and that it remained to be seen how the sector reacted to the “political turmoil” triggered by Liz Truss’ mini-budget and subsequent resignation.

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McBains managing director Clive Docwra said the sector was continuing to “demonstrate resilience” in the face of economic challenges.

“Order books currently remain strong in many work sectors, and the 5% increase in new orders in private commercial work is a sign that confidence is still in evidence,” he said.

He added that the industry nonetheless faced “a rocky road ahead” and said that with projects likely to be curtailed due to falling confidence, “a major risk is that crucial efforts to decarbonise building stock could be sidelined”.

“The government could help by giving the green light to a retrofitting programme, which will not only support the industry but help keep net zero targets on track,” he said.