Development Outlook Summer 2023: Construction output

There has been a cautious approach to construction in recent months.

In the three months to May 2023, construction new work was 1.3% lower than the three months previous. This was driven predominantly by a downturn in housing new work (-4.6%). Commercial and industrial new work has also fallen (-1.1%), while infrastructure new work has increased (+1.8%).

Figure 5:

Sources: ONS/CIPS; Carter Jonas

New work from March to May 2023, however, was broadly flat on the same period in 2022, mirroring ongoing uncertainty in the wider economy. In this period, the decline in housing new work (-6.5%) was offset by increases in infrastructure new work (+6.3%) and commercial and industrial new work (+2.8%).

Figure 6:

Sources: S&P Global/CIPS; Carter Jonas

The UK Construction PMI (a survey of construction companies measuring total industry activity) fell to 48.9 in June from 51.6 in May (see figure 6). This decrease marks the first contraction of the sector in five months (a reading above 50 indicates growth), and falls well below the 10-year average of 53.6.

Despite the overall fall, civil engineering expanded, bolstered by a strong infrastructure pipeline. Commercial building also expanded, but this was largely due to refurbishment projects. Some decision-makers were increasingly cautious, suggesting that future construction may slow. Meanwhile, the contraction in residential work accelerated, with providers reducing supply in the face of weakening demand.