Construction Market Overview: February 2024
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Construction experienced a mixed performance for the end of 2023, as business optimism is on the up going into 2024
The ONS have published their construction output data for December 2023, showing that in Q4 2024 construction saw a 1.3% decrease in output, primarily due to a significant fall in new work of 5.0%, despite an increase of 4.0% in repair and maintenance. In December, monthly construction output decreased 0.5% with new work declining 1.1% and only a slight rise in repair and maintenance 0.4%. Despite this, 2023 saw a 2.0% annual increase in construction output, marking the third year of growth. New orders dropped sharply by 13.1% in Q4 2024, with the private commercial and industrial sectors facing the most significant reductions. The year also ended with a moderated construction output price growth of 3.1%, a decrease from the peak rates observed in mid-2022.
January data from S&P Global/CIPS UK Construction PMI shows a two-year high in business optimism within the UK construction sector, despite subdued order books and a marginal decline in new orders. This optimism is attributed to expectations of improved financial conditions and economic prospects. The Construction PMI index increased to 48.8 in January from the 46.8 in December, indicating a moderate decline in industry activity. House building remains the weakest segment of activity, although the rate of decline has eased. January data also shows a cautious approach to staffing, an increase in input costs, and improved supplier delivery times.
The CPA’s latest Winter Construction Forecasts, reveal a projected 2.1% decline in construction output for 2024, attributed mainly to decreases in private housing new build and repair, maintenance, and improvement However, a positive turnaround is expected in 2025, with a forecasted output increase of 2.0%, buoyed by falling interest rates and overall economic recovery, potentially mitigating current construction challenges. The situation remains fragile going forward due to recent Red Sea disruptions posing risks of supply delays and cost inflation.
The DBT construction material price index for all work decreased 0.1% month-on-month in December and was 2.0% lower than a year earlier, marking the seventh consecutive annual decrease. Construction material prices for new housing increased 0.4%, with repair and maintenance and other new work falling by 0.8% and 3.8%, respectively in the year to December 2023.
The government has published its delayed National Infrastructure and Construction Pipeline 2023, outlining the investment plan for the UK’s infrastructure, projecting £700-775bn in spending over the next decade, with £164bn planned for investment by 2024/25. It emphasizes a shift towards Modern Methods of Construction (MMC), with £64bn of the investment over the next two years expected to utilise MMC. Also highlighted is a focus on sustainability, innovation, and productivity amidst a challenging economic environment.
A mixed outlook for the housing market as we go into 2024
The HMRC report that in December the number of property transactions in the UK totalled 80,420, 0.8% lower than November, and 17.8% lower than compared to a year earlier. Property transactions in December 2023 were also 16.8% lower than in January 2020 (pre pandemic). And the Bank of England report that in December the number of mortgages approved for house purchase was 50,459, increasing 2.3% from the 49,300 seen in November, and is 25.6% higher than a year earlier, which was during the post-mini budget spike in mortgage rates and slump in approvals.
Nationwide report that annual house price growth improved for January as it increased to -0.2% from the -1.8% seen in December, marking the strongest outturn in annual growth since January 2023. And Halifax report that annual house price growth grew to +2.5%, from the +1.8% seen in December, marking the highest annual growth seen since January 2023. On a monthly basis, Nationwide report that house prices increased 0.7% January when compared to the flat growth (0.0%) in December. Halifax report that monthly house prices increased 1.3% in January, making it the fourth monthly rise in a row. Finally, data from the ONS and Land Registry shows that UK house prices decreased 1.4% in the twelve months to December 2023, compared to the revised estimate of 2.3% seen in the year to November 2023.
For more insights and updates on the construction market, subscribe to our newsletter.
_____________________________________________________________________________________________________________________________________
