Detailed planning approvals in the third quarter of the year were up 12% on the second quarter and 32% ahead of 2022 levels. This sign of construction work coming down the line offers a ray of hope for green shoots of recovery.
Starts on site however remained weak throughout Q3, down 9% on Q2 and falling by almost 40% compared to last year. Main contract awards in the third quarter were 27% down on Q2 and 12% lower than the same period in 2022 and as economic and political disruption continues, we’ll likely see clients and contractors continue to adopt a cautious approach to start dates until the landscape looks a little less hostile.
Certain voices are ready to call for a drawn out recession period till next year but we still see activity throughout the industry.
The second quarter remained challenging for the UK economy, with inflation inching down and interest rates raised to accelerate movement towards the targeted inflation figures for the end of 2023. House prices have started coming down, bringing further uncertainty for homeowners during difficult times.
Merchant trading has seen the first signs of volume recovery in the second quarter. Price growth has slowed, but it has still been a difficult quarter overall. In hard economic headwinds this should however be welcomed and hopefully the first step towards market normality down the line.
The data shows H1 value growth down by -3.3% against 2022. Q2 value growth was down by -4.1%, while Q1 value was down by -2.3%. This shift however makes more sense when looking at volume and price growth. Volume in Q1 was down - 16.4%, improving to -13.5% in Q2. Price growth, a combination of inflation and product mix changes, sat at 16.9% in Q1 and has reduced to 10.9% in Q2.
Timber & Joinery and Landscaping have been the main drivers behind the value decline. The former has decreased by - 16.3% against 2022 Q2, while the latter is down by -12.4%.
Timber and Sheet Materials play a leading role in the Timber & Joinery decline, with Garden Walling / Paving and Fencing & Gates driving Landscaping decline.
Timber & Joinery volumes are however stabilising, with a decrease of -3.7% in Q2, compared to -9.7% in Q1. Landscaping price growth in Q2 was lower than the market average of +10.9%, sitting at +5.2%. Volumes in Q2 were down -16.8%, but that’s already an improvement from Q1 when volumes were down -22.6%. Heavy Building Materials value increased +0.5% against 2022 Q2, with price growth up +19.9% and volume down by -16.2%.
Aggregates, Bricks, Cement and Plasterboard have contributed most to the price growth. Finally, Lightside categories show growth for all areas apart from Services. Decorating stands out with value growth of +12.3%. Q3 will remain negative but should see price growth falling further and volume showing signs of recovery. The Construction Products Association (CPA) has indicated a construction recession in 2023, followed by recovery in 2024, so the remainder of the year will continue to challenge.
Challenges continued for the construction industry in the second quarter of the year, with the Office of National Statistics (ONS) reporting falling output in both April (-0.6%) and May (-0.2%). However, a positive result in June (+1.6%) led to overall construction output in Q2 2023 increasing by +0.3% compared with Q1 2023.
Repair and maintenance work increased by +0.9% in Q2, while new work saw a decrease of -0.1%. Anecdotal evidence highlighted the effect of weather, with output increasing during a warm spell in June. Five of the nine ONS sectors saw increases in Q2 2023 with the largest contributors being infrastructure new work (+6.1%) and non-housing repair and maintenance (+2.7%).
The largest negative contributor was private new housing, which fell by - 3.3%. The decline in private new housing is confirmed by figures published by the National House Building Council. The number of new home registrations fell by -42% in Q2 2023 compared with Q2 2022. The NHBC believe the reduction in registrations is largely due to accelerated volumes in Q2 2022, caused by changes to building regulations in relation to energy conservation. But completions also fell by -11% in Q2 2023, mainly due to lower demand stemming from rising mortgage rates, which are now at a 15-year high.
On a more positive note, the Federation of Master Builders’ State of Trade survey for Q2 2023 reports an increase in total workload and enquiries for FMB members largely driven by repair, maintenance and improvement work. Forty percent of FMB members reported an increase in workload compared to Q1 2023, with only 18% reporting a reduction – a net increase of +25%. Looking ahead, however, results from FMB members were less positive.
Although 40% reported an increase in enquiries in this quarter, 36% said that enquiries were lower in the second quarter of the year, than in the first. Overall, this means there has been a slight decrease in the net balance of enquiries since Q1 2023.
Prices appear to be stabilising. ONS figures show the annual rate of construction output price growth was +4.6% in the 12 months to June 2023; this has slowed from the record annual price growth in May 2022 (+10.4%) and we expect this downward trend to continue through the rest of the year.
- The construction sector fell by 0.5% in August 2023 after a fall of 0.4% in July 2023, revised up from a 0.5% fall in our previous publication, with the monthly value in level terms in August 2023 at £15,584 million.
- The decrease in monthly output came solely from a decrease in new work (1.5% fall), partially offset by an increase in repair and maintenance (1.0%) on the month.
- At the sector level, five out of the nine sectors saw a fall in August 2023, with the main contributors to the monthly decrease seen in private commercial and private new housing, which decreased 4.1% and 1.4%, respectively.
- Alongside the monthly decrease, construction output saw an increase of 0.9% in the three months to August 2023; this came from increases in both new work (0.9%), and repair and maintenance (0.9%).
- In line with the National Accounts Revisions Policy, this release gives data for August 2023 for the first time and incorporates revisions for all periods; revisions up to June 2023 are consistent with the Gross domestic product (GDP) quarterly national accounts, UK: April to June 2023 bulletin, published 29 September 2023.
That's A Wrap!
We hope this information in the report has been of some use to you. We do try to collate information from as many different areas as possible so please do refer to last quarters report as well for a crossover of information as some data sets are released at different intervals through out the year.
If you are already a client of Saint, please feel free to discuss with your business development manager to discuss this report and to provide specific data for your sector
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