October 22, 2021

Construction activity falls for the first time in 2021 with inflation worries impacting new work

Construction output fell by 2% in April in comparison to March, with reductions in both new work (2.9%) and repair & maintenance (0.6%). Latest numbers from the Office for National Statistics (ONS) show that the level of construction output in April 2021 was just under £14bn (a fall of close to £300m from March 2021) and was the first monthly drop since December 2020.

However, the figures for April 2021 are still 0.3% higher than the February 2020 figures driven by large growth in repairs and maintenance counteracting the drop in new work. The only area of new construction work that is above the pre-pandemic level is infrastructure with both housing and commercial levels of new work below the pre-pandemic level.

Stacy Eden, co-head of real estate and construction at RSM, said: “Whilst the construction industry generally continued its V-shaped recovery with output 5% higher than the previous quarter, a fall in monthly output is not surprising considering high cost inflations for construction materials being driven by demand and severe shortages.

“This was particularly apparent in private housing, which is still experiencing a flow of pent-up demand alongside policy support from the mortgage guarantee scheme, Help to Buy and the stamp duty holiday however the monthly fall of 11% for new private housing is being caused by bottlenecks in the system, the continued difficulty in planning approval and of course the knock-effect from uncertainty in 2020. The government is keen to reform planning to ensure we meet our need of 300,000 units a year but falls in output will pose a risk to these targets.

“Infrastructure remains strong with 10% growth as onsite operating and safety measures are markedly easier than in other sub-sectors. The repair and maintenance sectors are also still driving activity as homeowners and commercial occupiers re-assess their use of space and planned work put on hold resumes again.

“As we look ahead the construction sector is clearly stating its case as ready to work; however issues in the supply chain will be frustrating for a sector that is trying to respond to a surge in demand and deliver on government agendas such as levelling up, net zero and build back better.”