UK Edition
Britain’s construction sector recovery will “gain a new lease of life” this year as supply chain issues ease and a warehousing boom continues, according to a leading economics consultancy.
Pantheon Macroeconomics predicts construction output will be about 5pc higher this year than in 2021, and 1.5pc above pre-pandemic levels by the end of 2022.
Economist Gabriella Dickens said: “Supply chain disruptions and labour shortages weighed on the recovery in the construction sector last year.
“We see good reasons, however, to expect the construction sector's recovery to get back on track this year.”
Data released on Friday showed construction output rose by 2pc in December to reach 0.3pc above its pre-pandemic level. The recovery has been led by repair and maintenance work, with new work still below February 2020.
New infrastructure work is way above pre-pandemics levels, the only sub-sector that has seen a boom since the first lockdown. In contrast, private commercial work and public housing construction remain depressed.
Ms Dickens said high levels of business confidence and recent surveys suggests the industry’s headaches with shortages of materials and labour are beginning to ease, paving the way for a pickup in new developments.
“Demand from retailers and consumer services businesses for new buildings might be soft, given that the end of the evictions ban in March likely will lead to an increase in vacancies of existing premises,” she said.
“But this weakness likely will be more than offset by strong demand from manufacturers, logistic and warehousing companies, and professional services firms.”
The latest purchasing managers’ index readings for the sector, released last week, said construction growth hit a six-month high in January after a full twelve months of sustained increases.
IHS Markit and the Chartered Institute of Procurement and Supply said supplier lead times “continued to lengthen” during the month, but added “the peak phase of supply chain difficulties appears to have passed”.
In a sign of the boom in demand for warehousing space as Britons turn more and more to online shopping, investor Arrow Capital Partners last week paid a record-breaking £233m for a huge logistics facility in West Yorkshire let to retail titan Amazon.
Not all experts are so optimistic, however. Glenigan, a construction industry intelligence firm, said construction suffered an “abnormally weak” January, with project starts falling to a “significant low”.
“Persistent labour and supply chain issues are still having a negative effect on output, holding back recovery, and proving a primary reason for such poor performance,” its February construction index said.
“This has been further exacerbated by rising material prices and deteriorating economic prospects, prompting some clients and developers to review project costings or viability, delaying starts on site.”