Construction output in May lifted by 1.5% compared to the month before, the seventh month in a row of volume growth amounting to a record high of £15.1bn.
The May increase came solely from a rise in new work, of 2.8%, as repair and maintenance activity registered a slight decline, falling by 0.4% on the month, according to the Office for National Statistics.
At the sector level, the main contributors to the May increase were private commercial new work and private new housing, which jumped by 12.1% and 7.2%, respectively.
This data comes after ONS figures in April were revised to a 0.3% rise from a 0.4% decline. The May headline cash value is the highest since records began in January 2010.
May construction output this year was 4.1%, or £598m, above the February 2020 pre-pandemic level. New work was slightly below, by £3m, the February 2020 level, while repair and maintenance work was £601m above the February 2020 level.
The recovery to date, since the falls at the start of the pandemic, is mixed at a sector level, with infrastructure at 19%, or £356m, above and private commercial at 21.2%, or £524m, below their respective February 2020 levels in May this year.
Construction output increased by 3% in the three months to May 2022, which offers a longer term view of activity across the sector, with increases seen in both new work, and repair and maintenance at 2.4% and 4.1%, respectively. This is the seventh consecutive growth in the three-month on three-month series, and the largest growth seen since June 2021, which hit 4%.
McBains managing director of property and construction consultancy Clive Docwra says: “These figures are a real tonic given continuing inflationary pressures, increases in the price of building materials and the Ukraine war, and suggest that the sector is finally emerging from its struggles as a result of the pandemic.
“The significant increases in private commercial new work and private new housing – 12% and 7% respectively – suggest a fresh wave of confidence is spreading among investors.
“But the figures also show that recovery since the decline at the start of the pandemic is mixed at sector levels. Infrastructure contracts may be 19% above levels of February 2020, but private commercial work is still 21% below that period.
“The uncertainty over who will be the next Prime Minister also means there will be doubts over the direction of policy in areas such as housing and infrastructure, which will translate into some investors holding off on committing to longer term projects.”
Assetz Group chief executive Stuart Law adds: “While today’s figures reveal a record boost in the construction industry, the price of key materials and labour shortages continue to make business untenable for many small and meduim-sized enterprises.
“A record number of UK construction businesses went bust last year as smaller companies struggle with soaring construction costs and backlogs in the planning system, amounting to 3,400 in the year to April.
“Rising costs, caused by inflation, Brexit and material shortages are just a few challenges disproportionately impacting smaller builders. While more companies are beginning to stockpile materials, as costs of products are reaching new highs, many SMEs don’t have surplus cash to buy supplies in advance or the capability to transfer increased costs onto the customer.
“As a result, what should be a profitable time for small and medium sized businesses is actually becoming a time of loss and many SMEs are in fact, going under.
“Banks are visibly pulling back funding for SMEs and the government has shown little willingness to support or revitalise the SME construction sector. In 1988, small developers were responsible for four in every ten new build homes.
“Today, it is around just 10%. If this continues, we risk a huge crisis in the construction industry with even more SMEs going under, and dwindling hopes of meeting the government’s target of building 300,000 new homes every year.”
The ONS data comes after the Bank of England has raised interest rates five times in a row since December to 1.25%, and inflation hit 9.1% in May, a 40-year high.
The UK economy lifted by 0.8% in the first quarter of this year, and lifted by 0.5% in May after shrinking in April and March, according to other ONS data, partly driven by construction growth, although economists are concerned over slowing consumer spending in the face of higher energy and food prices.
