There are signs that the slump in the construction market may be bottoming out, with a modest increase in output in January according to the latest figures from the Office of National Statistics. 

Its figures show a 1.1% increase in output in January, after three consecutive monthly falls. This increase reflects both an increase in new construction projects (up by 1.1%), as well as increased repair and maintenance activity (up 1.2%). 

The ONS figures show this increased activity was being driven primarily by construction for new private housing (up 2.6%) as well a non-housing repair and maintenance (up 1.9%). Overall in January six out of the nine construction sectors defined by the ONS saw increased activity in January. 

However, this increased activity over the month was not enough to turn around quarterly figures, which continue to trend downwards. 

The ONS data shows that construction output fell by 0.9% in the three months to January this year compared to the previous quarter. 

This decline was driven entirely by a fall in new projects, which were down by 4.5% over this three month period. In contrast there was a 4% increase in repair and maintenance work. 

The biggest drop was in new infrastructure projects, down by 9.3%, while new construction projects for private house fell by 5.2% over the three months to the end of January.

Commentators remain cautious about whether this uptick at the end of the quarter signals a more sustained return to growth. Although these three months figures remain negative, the decline is smaller than the previous quarterly update – when output fell by 1.3%. 

McBains managing director Clive Docwra says:  “After three consecutive months of falling output, the industry will welcome January’s return to growth.

“The 2.6% increase in private housing is particularly encouraging given the performance of this sector over the last few months. The hope is that if mortgage rates ease, it could lead to increased residential demand which in turn could trigger a bigger turnaround in housebuilding numbers.

“But whether the increase in January turns out to represent the green shoots of wider recovery or a blip remains to be seen.  

“Growth over the longer term is estimated to have decreased 0.9% in the three months to January 2024, highlighting that conditions remain unsettled for many industry sectors.”

Shawbrook MD of development finance Terry Woodley adds: “The latest ONS figures showing a decrease in construction activity in the three months to January are balanced by a welcome uptick in construction activity month on month.

“While falling inflation offers some relief, it may not have been enough to fully offset the headwinds the industry faces. This could delay the potential boost to housebuilding anticipated from softening mortgage rates.

“Similar to other sectors, commercial construction continues to grapple with supply chain disruptions and weather-related setbacks. Additionally, the lack of specific construction measures in the Spring Budget has further dampened confidence, which could hinder future activity.

“As we approach election season, it will be interesting to see if policymakers prioritise the construction sector and address issues like supply chains and skills shortages. Focusing on areas like brownfield development and sustainable building practices could also be key to a more resilient industry.”

Beard finance director Fraser Johns adds: “The sector as a whole has certainly started the year with greater confidence and a real sense of optimism, with an increase in new work in January contributing to a rise in construction output. It certainly mirrors what we’re seeing on the ground at Beard throughout the first quarter of the year, with our secured orders at a record high.

“A key factor is shifting sentiment around the future prospects of the market and the economy, with an improved outlook for both giving clients the necessary confidence to commit to new projects. Given the consistent trend of repair and maintenance, we are continuing to see clients taking stock of the assets they have and making any necessary improvements ahead of pure replacement.” However he adds that while conditions continue to improve there’s not question that challenges remain.