Is construction output on the up? Or do the figures flatter to deceive?

Builders’ Conference CEO Neil Edwards reports on construction contracts from June to August, stating that the trend is upward, but the detail might raise concerns.

June

The government looked to construction to lead the nation out of recession with the promise of a £5 billion infrastructure cash injection. However, overall contract awards failed to break the £4 billion benchmark that had been the established norm for more than two years. Having said that, 256 companies did win new contracts this month.

 With a total of nearly £1.6 billion, housing once again led the way in the sector standings, followed in a distant second place by offices with £571 million. With the road and rail sectors contributing just £74 million and £20 million respectively, the government’s planned cash boost for the infrastructure sector could not have come at a better time.

In the regional run-down, London once again claimed the top spot – however it fell short of its usual £1 billion mark with just £972 million. This was offset by fine performances in the North West and South West regions that contributed £652 and £549 million respectively.

July

After two consecutive months (May and June) in which it appeared the COVID-19 crisis had finally taken the wind out of the UK construction sector’s sails, the industry bounced back in July with an above average performance, underlining its apparent new-found resilience.

As the naysayers were preparing to pronounce UK construction as the latest victim of the coronavirus, the industry bounced back with a £5.4 billion total for the month.

That figure was unquestionably buoyed by a single £1 billion new contract award. But even without that, the sector would have topped the £4 billion mark, a notable accomplishment in a month that traditionally foreshadows the summer lull. That mega-contract was won by Berkeley Group in a contract that will see the former Parcelforce depot in London’s West Ham redeveloped to provide over 1,800 homes, a 4.5 acre park and community, retail and commercial space.

Regionally, London was the runaway leader with more than £2 billion in new contract awards. Hertfordshire and Kent – with £736 and £419 million respectively – claimed second and third positions while Scotland marked the end of lockdown with a welcome £264 million haul.

Sector-wise, the miscellaneous category reigned supreme in July with a total of £1.9 billion thanks to a large number of mixed-use developments. However, those mixed-use developments generally comprised of a degree of housing and accommodation, reconfirming the industry’s continued reliance upon the housing sector. Overall, 259 companies won new contracts during July.

August

The UK construction sector delivered another upbeat set of new contract awards in August. Overall, 265 companies won new contracts during August. But underlying imbalances in the make-up of those figures make for more telling reading.

With the construction sector having lost months of production and output during the COVID-19 lockdown, it appears that much of the industry chose to not go on holiday and remain at work. As a result, new contract awards topped the £4 billion benchmark (£4.8 billion) for the second month in succession. But, dig a little deeper into August’s figures and some worrying imbalances appear.

Firstly, despite promises of increased infrastructure spending and government initiatives to ensure that construction leads the nation’s recovery, privately-financed projects accounted for 70% of all new contract awards during the month. Any increase in government spending has thus far failed to redress the balance between private and publicly financed projects.

There is also significant imbalance in the geographic spread of work. Yorkshire enjoyed a significant uptick this month and reported a total of £417 million split across 21 individual projects. But while London retained its geographic lead with 100 new contract awards totalling £1.46 billion, Scotland languished with just nine new projects worth a combined £104 million.

More concerning still is the industry’s increasing reliance upon the house-building sector. For the past few years, housing has contributed somewhere between a third and a half of all new contract awards. In August, stand-alone housing accounted for just over a half of all new contract awards by value. But by factoring in the housing element of the numerous mixed-use developments recorded this month, housing accounted for as much as three-quarters of all UK construction activity.

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