Dip in home building output holding back economic recovery

The fall in construction output below the pre-pandemic level in February 2020 is a wakeup call that the construction industry is struggling according to the Federation of Master Builders (FMB).

The comments come in response to ONS data on construction output which shows a dip of 1.8% in July, the fourth consecutive month of decline. The decline in monthly output in volume terms in July 2021 came mainly from private housing, which saw falls in both new work, and repair and maintenance of 7.5% and 6.2% respectively.

Despite high demand, new orders in the construction industry data saw quarterly total housing new orders increase by 2.9% in Quarter 2 (April to June) 2021, the decrease in housing output is being blamed on upward pressure on prices.

The availability of certain construction products (most notably steel, concrete, timber and glass) because of supply chain shortages is hindering the development of new build properties. Half of construction organisations have reported a higher than anticipated rise in costs.

Brian Berry, Chief Executive of the Federation of Master Builders the largest trade body association in the UK construction industry, commented.

“Disappointingly, we once again see construction output fall, putting it below pre-coronavirus levels. We know that material price increases and skills shortages are contributing to the decline, with members telling us this is their number one issue. According to a recent FMB survey 98% of builders are facing material price increases.

Worryingly, new work and repair and maintenance in private housing are the main causes for this decline, which are the backbone of the workload for small builders. I’m concerned that despite the high demand for home improvements, something which could stimulate economic recovery, we see this sector on the decline. We must pull together as an industry and press government to ensure these issues are dealt with quickly.”

Last week the governor of the Bank of England, Andrew Bailey, warned that the recovery from the worst of the COVID-19 pandemic was being affected by supply chain disruption and staff shortages. Answering questions from MPs on the common’s Treasury Committee, Bailey suggested there may be a “levelling off” of the recovering, adding,

“But it’s still within the context of this imbalance in demand for goods and services. At the moment we’re seeing some levelling off of the recovery, the short-term indicators are suggesting that,” .

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