Election and costs push output back in July

Construction industry output dropped by 0.4 per cent in July, official data has revealed.

The latest figures from the Office for National Statistics (ONS) showed a reversal of activity following an increase of 0.5 per cent in June.

Material and labour costs plus general election uncertainty were highlighted as reasons for the decline by industry figures.

Drops were recorded in both new work (0.2 per cent) and repair and maintenance (0.7 per cent).

The data showed that activity fell in five out of the nine sectors.

Decreases were biggest in private commercial new work and private housing repair and maintenance, which fell by 2.4 per and 1.7 per cent respectively.

But private new industrial was up 3.6 per cent and public new housing was up 1.8 per cent.

The value of total output for the month was £19.03bn (see graph below), according to the ONS.

Fraser Johns, finance director at construction firm Beard, said: “This snapshot covers a pivotal moment for the sector and the economy more broadly, following the general election period.”

Industry figures also raised concern because the data is seasonally adjusted to take into account summer holidays and followed two months of recovery.

Clive Docwra, managing director of property and construction consultancy McBains, said the drop in private new work was a setback.

“After May and June’s figures showed an increase in output, the construction industry was expecting better news for July,” he said.

Terry Woodley, managing director of development finance at Shawbrook, said: “The construction sector continues to face challenges, with the latest figures showing a further decline in activity for July. Despite the warmer weather, construction remained sluggish, with rising costs for materials and labour, compounded by the naturally slower summer holiday period.”

But the ONS also issued good news, with construction output estimated to have grown by 1.2 per cent in the three months to July 2024. This came from increases in both new work (1.6 per cent), and repair and maintenance (0.8 per cent).

Docwra said: “Although the figures may not show a post-election bounce, the optimism created by the new government’s announcements on housebuilding means the industry is feeling optimistic for the medium term, borne out by today’s figures.”