construction output report 2020/21

The growth in Quarter 3 (July to Sept) 2020 is the largest quarterly growth in construction output since quarterly records began in 1997.

see below graph. 

The significant decrease seen in Q2 caused by the COVID-19 pandemic aftermath has allowed for a huge turnaround and scale change to the below graph that has not seen such a dramatic up-lift in all recording. Growth rates continue to creep up as we look to report on Q4 and analyse the year in construction 2020.  

Q3 2020 was the first quarter since Q2 2018 where all three months in the quarter saw month-on-month growth. These figures are slowed since the initial boost of 17.4% in July 2020 followed by 3.8% in August 2020. 2.9% in September 2020 was the fifth consecutive month of growth and was driven by growth in all sectors apart from public new housing, infrastructure and public other new work. These three see a slow decline, notably, since initial strongholds for infrastructure and mid-year growth, the sector has since lost momentum. 

September in facts.

• The level of construction output in September 2020 was 7.3% below that in February 2020, with only infrastructure and private new housing having returned to above their pre-pandemic levels of output. (growth has declined but still maintains greater output).
• The annual rate of construction output growth was 0.4% in September 2020.
• Quarterly construction output grew by a record 41.7% in Quarter 3 (July to Sept) 2020 compared with Quarter 2 (Apr to June) 2020. 

Monthly construction output increased by 17.6% in July 2020 compared with June 2020, rising to £11,922 million across all sectors. This growth rate reduced in August to a 3% uplift on July to £12,455 million. This remains below February figures, pre-lockdown at a 10.8% reduction.

ONS survey data suggests this levelling of growth is due to companies adjusting to the new health and safety measures implemented on sites reducing site capacities and working efficiencies. 

However, this level of construction output remains lower than figures pre-February 2020, before the full impact of the coronavirus (COVID-19) pandemic. This is shown by total construction output in July 2020 at 11.6% (£1,561 million) lower when compared with February 2020.

The growth in July 2020 comes after a steady increase month-on-month since the decline in April 2020 of 40.2%. To breakdown the period of COVID recovery, May saw a 7.6% increase followed by record monthly growth of 23.5% in June 2020. July's figures were the second-largest monthly growth since monthly records began in January 2010.

The below graph displays the gradual growth and sudden shock in 2020 from the global pandemic.

Figures from the Monthly Business Survey (MBS) for construction and allied trades and our survey of clients and candidates, suggest a continued increase in activity across the construction sector. However, health and safety measures such as social distancing, have meant that the capacity and level of output are not at the same level of work experienced prior to the coronavirus pandemic.

Despite the aforementioned strong monthly growth in the industry in 2020 post-pandemic launch, overall output remains substantially lower than pre-covid months. The single outlier is Infrastructure, the only industry to recover greater than pre-covid output figures with a 6% increase. 

August drops to a 0.6% growth rate on February's figures, still positive results but less than the initial summer boom showing a slowing overall of construction growth heading into the autumn months. 

Infrastructure in 2020 accepts the boom in support for large scale projects such as HS2 and governmental commitment to build, build, build to invest in the UK economy. As the table below explains, across the board all sectors have suffered a drop in output from the beginning of the year as we look back on July 2020. With a long road to recovery still ahead, steps are being made in the right direction as we face 2021 and continue the newways of working.

Construction output fell by 10.6% in the three months to July 2020, compared with the previous three months of the year, because of declines in all sectors apart from infrastructure.

New work decreased by 9.7% (£2,160 million) in the three months to July 2020, the largest single contributor to which was private new housing, which fell 17.0% (£1,130 million).

Infrastructure was the only sector to see growth, increasing by 6.0% (£310 million) from May to July 2020 compared with the February to April period. This is the largest increase in infrastructure since February 2018, where infrastructure grew by 7.8% (£392 million). This is likely due to the lesser impact of social distancing measures on larger sites in this sector. 

Repair and maintenance fell by 12.4% (£1,432 million) in the three months to July 2020. Private housing leads this, which decreased 17.9% (£688 million) in this period. 

Anecdotal evidence received from the previously stated survey respondents, explained how housebuilders continued to return to work on construction sites in July 2020, though because of measures such as social distancing they were not operating at full capacity.

The latest three monthly data to August shows a steady increase across all of construction resulting in a record 18.5% (£5,440 million), compared with the previous three-month period. This was because of increases in every sector apart from private industrial new work, which fell by 6.5% (£65 million).

This overall summer recovery displays a better trend for construction, where despite the initial spring drop in overall output, the latest reporting shows a better story and gradual recovery since the covid pandemic affected the industry as shown in the figure 1.  

The Business Impact of Coronavirus (COVID-19) Survey (BICS) evidenced an increase in activity in the construction industry in July 2020. Responses supported the figures outlined in the below table.

As shown below, BICS Wave 9 data relates to the period 29 June to 12 July 2020, showing the construction industry respondents had the third-highest proportion of the workforce returning from furlough leave, with 14.8%, which was well above the 7.2% average for all industries. 

• Wave 9 relates to the period from 29 June to 12 July 2020 and Wave 10 relates to the period from 13 July to 26 July.

This continual return shined positively on the growth of the industry post initial lockdown measures across the UK. It also supported national support towards the industry as a whole as well as governmental backing to build back Britain better.

Evidence from this survey continued positively into August showing that the construction industry respondents had a lower proportion of their workforce on partial or furlough leave than the average for all industries. From the period of 10 August to 23 August 2020, construction industry respondents had 7.5% of their workforce on partial or furlough leave compared with the 11.0% average for all industries.

Similarly, our own research supported this sentiment from our clients. Almost 40% of clients expected to be back at full capacity by Q4 of 2020 with 80% of employers stating they were already up and running effectively in July.