But SME housebuilders feel the pinch of soaring costs
Britain’s monthly construction output increased by 1.5% in volume terms in May 2022 – the seventh consecutive monthly growth and a record high of £15.05 billion in monthly level terms since records began in 2010.
According to the Office for National Statistics (ONS), the latest increase in monthly construction output came solely from a 2.8% increase in new work as repair and maintenance saw a slight decline, down 0.4% on the month.
At the sector level, the main contributors to the increase were private commercial new work and private new housing, which increased by 12.1% and 7.2% respectively.
ONS said that the level of construction output in May was 4.1% (£598 million) above the February 2020 pre-pandemic level. New work was slightly below (£3 million) the February 2020 level, while repair and maintenance work was above (£601 million) the level before COVID-19 hit.
The recovery to date, since the falls at the start of the coronavirus pandemic, is mixed at a sector level, with infrastructure 19% (£356 million) above and private commercial 21.2% (£524 million) below their respective February 2020 levels in the latest data.
Alongside the monthly increase, construction output increased by 3% in the three months to May 2022, with increases seen in both new work, and repair and maintenance at 2.4% and 4.1% respectively. This is also the seventh consecutive growth period in the three-month on three-month series, and the largest growth seen since June 2021, when it hit 4%.
Stuart Law, chief executive of the Assetz Group, said that while these figures reveal a record boost for the construction industry, the price of key materials and labour shortages continue to make business untenable for many small- and medium-sized enterprises.
“A record number of UK construction businesses went bust last year as smaller companies struggle with soaring construction costs and backlogs in the planning system,” Law pointed out.
“Rising costs, caused by inflation, Brexit, and material shortages are just a few challenges disproportionately impacting smaller builders. While more companies are beginning to stockpile materials, as costs of products are reaching new highs, many SMEs don’t have surplus cash to buy supplies in advance or the capability to transfer increased costs on to the customer.”
Law said that, as a result, what should be a profitable time for small- and medium-sized businesses is actually becoming a time of loss and many SMEs are, in fact, going under.
“Banks are visibly pulling back funding for SMEs and the government has shown little willingness to support or revitalise the SME construction sector. The government can no longer sideline this issue – large construction companies will only solve a fraction of the issues,” the executive stressed.
“We need to see quick change that gives SMEs greater access to alternative funding, such as peer-to-peer financing, as well as simplification of the planning process. This will enable SMEs to grow and scale up.”
Law said investors are keen to back SMEs, adding that “if we want to revitalise the construction industry and boost growth, we must think of new and alternative ways to fund the industry.”
