Construction Output Down By 7.1% in March 2020 Compared to Last Year

The latest construction output numbers from the Office for National Statistics shows construction output down in March 2020. Construction output fell a significant 7.1% for the month when compared with last year’s figures.

This is news that will not surprise anyone given the environment we are operating in but perhaps the scale of that drop in output might.

The release from the ONS, Construction output in Great Britain: March 2020 and new orders January to March 2020, makes sobering reading. It shows the lowest level of construction output for years and is likely not the worst of what the industry is going to experience over the coming few months.

March was just the beginning of lockdown. With the economy in stasis throughout April and May and an uncertain road ahead, the March output numbers are likely just the tip of the iceberg.

Other findings from the ONS construction output data

The report had a number of key indicators worth taking notice of, including that headline number.

  • Total construction output fell by 5.9% month to month for all work.
  • There was a 6.1% decrease in new orders and a 5.1% decrease in repair and maintenance work.
  • Private new housing orders fell by 6.1% in March 2020.
  • Private commercial building orders fell by 7.1% in March 2020.

Unsurprisingly, COVID-19 is being cited as the main cause of this slowdown.

Up until that point, we had seen new order growth of 11.8% in the first quarter with new housing orders increasing by a full 12.5%.

There were signs that not everything was in positive territory though.

Behind the numbers

The reduction in construction output is being blamed on COVID-19 but that isn’t the whole story. We saw a modest output reduction in February before lockdown and before the extent of the pandemic was fully realised.

We saw a drop of 2.1% in monthly growth in February after a very modest bump of 0.1% in January 2020. So while the COVID-19 situation has had a huge influence over the industry, there were mixed signs already.

The reduction in repair and maintenance work cited in the report mainly came from private housing. It fell by 8.6% during March, which equates to around £136 million.

Aside from the reduction in orders, the COVID-19 situation has also highlighted significant weaknesses in the construction supply chain. As countries went into lockdown, shortages of many common materials quickly became apparent. This will also have contributed to the reduction in construction output.

But supply chain issues may have a hidden benefit.

The road ahead

Construction companies will be looking to bring procurement closer to home after COVID-19. Shortages, longer lead times and suppliers going out of business have all provided further challenges for the industry.

Even though lockdown is being gradually eased, those shortages are still apparent. This will likely lead to rationing with essential resources being used in critical maintenance and critical works rather than new projects. This will likely cause further delay in the private and commercial sector until the supply chain normalises.

Even though lockdown is easing and building can resume, we don’t expect to see an upswing in numbers until the disruption within the supply chain is resolved. Even then, with layoffs, skills shortages and nervousness around the road ahead, it is unlikely that construction output will reach positive numbers for a couple of months yet.

Article provided by: Ibex Supplies, construction product supplier based in Littlehampton.


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