Construction overview
Output fell on a quarterly basis in Q1
Construction output fell by 0.9 percent in Q1 compared to Q4 2023, the same rate of decline recorded in Q4. Compared to Q1 2023, output is down 0.7 percent. The negative effects of adverse weather in February, one of the wettest months on record, depressed output and delayed work.
The quarter-on-quarter decline was mostly driven by new works falling by 1.8 percent, despite repair and maintenance (R&M) work inching up by 0.3 percent. Within the new works subsectors, there was widespread decline in activity with private commercial output falling by 5.3 percent, followed by private industrial (3.2 percent), public sector (2.5 percent) and infrastructure (2.2 percent).
Within R&M, private housing R&M output grew strongly by 4.9 percent in Q1, but non-housing R&M fell by 3.3 percent.
After five consecutive quarters of contraction, private housing output grew by 1.3 percent on the quarter. Nevertheless residential output is still more than a fifth below its Q3 2022 peak, suggesting the sector is still struggling with high mortgage rates.
Source: Office for National Statistics
New orders
Total construction new orders grew by 15.9 percent in Q1 2024, compared with Q4 2023. This represents the best performance in new orders quarter-on-quarter data since Q4 2021 when it was 13.4 percent. This improvement also more than reversed the Q4 quarterly decline of 13.3 percent.
The largest contributor to increased new orders came from private industrial, which surged by 35.3 percent on a quarterly basis in Q1. This can be partly attributed to an uplift in the numbers of data centers being constructed.
Private commercial new orders grew sharply by 27.9 percent during Q1, driven by increased demand for offices, health and entertainment facilities according to the ONS.
In the year to Q1 2024 private commercial new orders have grown by 23.4 percent. More recent indicators, such as the April S&P Global UK Construction PMI, are reporting positive signals with commercial building activity growing for the first time since last August.
Private housebuilding grew by 5.3 percent in the same period, following a sustained run of weak activity since Q3 2021. High borrowing costs and new homes, which command an average price premium of 38 percent over existing homes, means affordability remains a major concern for buyers.
Revival in housing demand is still some way off and dependent on how quickly cuts in the Bank Rate feed through to lower mortgage rates.
Public new housing fell sharply, by 53 percent on the quarter. However, the value of new orders is small, meaning that any changes can have a disproportionately large impact on what is often volatile data. Housing associations have reduced the construction of new builds, constrained by higher costs and the need to redirect budget towards repairs and upgrading.
Infrastructure new orders increased by 1.8 percent in Q1 but are down -16.4 percent on the year, as the sector may still be coming to terms with the cancellation of the northern leg of HS2 as contractors look for alternative projects.
Source: Office for National Statistics
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