UK Construction Industry Surpasses Pre-Pandemic Output, Reaching Record High in March

Posted on 14 May 2021

In March, the construction industry in the UK achieved a significant milestone as it surpassed its pre-pandemic level of output, according to the Office for National Statistics. The latest data revealed that a staggering £14.25 billion worth of construction work was completed during that month, representing the highest recorded level since September 2019. This figure stands in stark contrast to the £13.92 billion reported in February 2020, which was right before the pandemic unleashed its severe impact on the nation. This remarkable achievement marks the first time that the construction output has exceeded its pre-pandemic level.

Mark Robinson, the chief executive of Scape Group, hailed this continued growth in output and emphasized the industry's resilience in overcoming the challenges it has faced over the past year. Such commendation reflects the unwavering determination and adaptability exhibited by construction professionals in the face of adversity.

Analysing the quarterly performance of the construction sector, it becomes evident that infrastructure work has demonstrated the most remarkable growth. During the first quarter of 2021, infrastructure projects experienced a noteworthy increase of 4.3 percent in output compared to the final quarter of 2020. Kelly Boorman, the partner and head of construction at RSM, shed light on the positive outlook observed in March, underscoring the industry's V-shaped recovery. The relative ease of implementing onsite operating and safety measures in infrastructure projects, coupled with the completion of delayed work aimed at revitalising communities affected by lockdown measures, contributed to the sector's robust performance.

Both the construction of public and private housing experienced a quarterly growth rate of just over 3.6 percent, while commercial work witnessed a 3 percent increase. These developments further reinforce the overall upward trajectory of the construction industry.

The growth in construction output was accompanied by a surge in new orders. In the first quarter of the year, new orders escalated by slightly over 12 percent, reaching £11.31 billion, in contrast to the £10.08 billion reported in the final quarter of 2020. This increase in new orders reflects a heightened demand for construction services and projects, showcasing a positive market sentiment.

Nevertheless, industry experts have raised concerns regarding the potential impact of inflation pressures on the construction sector's robust recovery. Clive Docwra, the managing director of property and construction consultancy McBains, cautioned that the rising cost of raw materials poses a threat to profit gains, particularly considering that many construction firms operate with narrow margins. The escalating costs also serve as a warning sign of broader global inflationary pressures, which have the potential to disrupt sustained long-term growth in the industry.

Further evidence of the mounting inflationary pressures can be found in the recent Purchasing Managers' Index (PMI) survey for April. The survey revealed that construction costs were rising at the fastest pace since its inception in 1997, underscoring the urgency of addressing this issue to maintain the industry's momentum.

The UK construction industry's achievement of surpassing its pre-pandemic level of output in March is a testament to its resilience and adaptability. The growth in infrastructure, housing, and commercial projects, coupled with an increase in new orders, paints a positive picture for the sector's recovery. The industry must remain vigilant regarding the inflationary pressures arising from escalating raw material costs, as addressing these challenges will be crucial in sustaining the long-term growth and success of the construction sector.

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