Construction output drops as UK economy returns to growth

Construction output dropped at the beginning of the year, despite a return to growth across the economy as a whole. 

The latest GDP figures released today by the Office for National Statistics showed monthly construction output was down 1.7% in volume terms in January, the weakest monthly performance since last June, when output dropped 2%. 

The decline was driven primarily by a 4% fall in new work, which was only partially offset by an increase in repair and maintenance work (2%). Bad weather at the start of January was also blamed for the slump

There was a stark drop in new infrastructure work (6.5%) as well as private housing new work (3%). 

The ONS said returns from its monthly business survey for construction and allied trades “continued the narrative around economic uncertainty leading to delays, cancellations and less work being requested by customers in general”, with heavy rainfall at the beginning of the year also having an impact. 

Economy-wide, monthly GDP grew by a stronger than expected 0.3% in the first month of the year, after falling 0.5% in December 2022. 

Mark Robinson, chief executive of procurement body Scape, said it was “unfortunate to see a dip in output after a resilient end to 2022” and added the industry would be looking to next week’s budget for “a steer on the government’s intentions and how this might affect workloads”. 

“While a public sector spending spree looks unlikely, with local authorities being told to keep the purse strings tight, firms might be left hopeful by the recent news on enhanced tax receipts and underspending in various government departments,” he said. 

Clive Docwra, managing director of consultancy McBains, said it was clear the fall in infrastructure new work was “a particular worry”, given the sector has “propped up” the industry’s performance in recent months. 

He welcomed reports that the budget could see the government make changes to the points-based immigration system to allow construction, which he said was “hamstrung by skills shortages”, to recruit more foreign workers.