Housebuilding leads overall construction decline

The housebuilding industry led a decline in construction work in July, leaving industry output below the level seen prior to the pandemic. 
HMS on site at Sisters of Nazareth in Birkenhead

The housebuilding industry led a decline in construction work in July, leaving industry output firmly below the level seen prior to the pandemic. Official figures showed that the seasonally adjusted level of new build housing work dropped by 6.5% in July compared to June, with the drop sharpest in the private housebuilding sector. The Office for National Statistics said private housing work fell 7.4% to £2.7bn, with public housing output relatively stable, losing just 1% month-on month.

While both numbers are way above the equivalent figures from July last year, when the industry was just recovering from the spring lockdown, they leave output well below pre-pandemic levels. While public housing work has never yet regained its pre-pandemic level, and remained 11.2% under it in July at £491m, private housebuilding activity did top February 2020 levels between February and April this year, but has now fallen back sharply, and sat 8.4% adrift in July.

Market data suggests housing demand has fallen back since the government withdrew part of the stamp duty relief introduced in the wake of the 2020 lockdown, and while prices remain high, this is in large part because of a shortage of homes coming on to the market. Nevertheless, the ONS put the fall down to the continued disruption and cost rises in the supply, caused by widespread materials shortages. The ONS said the housing decline was “driven by the impact of price increases likely caused by product shortages in the sector”.

The month also saw a decline in housing repair and maintenance work of 4%, with private domestic work falling by 6.2%, and public housing work falling by 2.1%. The decline in housing output contributed significantly to a 1.6% decline in construction output overall in July.

The ONS said anecdotal evidence from businesses suggested that while construction order books remained full “price increases and product shortages caused by supply chain issues” were the main reasons for the decline.

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