Don't pop the corks quite yet – but construction proving resilient
If not exactly a cause for breaking out the Dom Perignon, last week’s construction output figures from the Office for National Statistics were at least encouraging. After a truly forgettable year of pandemic, lockdowns and social distancing, things appear to be heading in the right direction for the industry.
The ONS reported that, in January 2021, construction output was still down nearly 3% on the previous February, which readers will recall was the last ‘clean’ month before the UK entered its first national lockdown.
Construction outperforms the market
While growth would obviously have been preferable, the figures point to a pretty sharp recovery from one of the sharpest declines in recent memory. Construction has outperformed almost every other sector of the UK’s battered economy, which speaks volumes about how other sectors have fared.
That said, the ONS data features an output chart which shows a massive slump in March 2020. It’s a testament to the construction sector that this collapse was followed almost immediately by a rapid recovery. This rebound illustrates the resilience of the sector. After the initial shock of the first lockdown, it realised it could get work done, and got on with it. True, very large sites, particularly public works, were closed. But smaller sites, especially housebuilders, were able to deal with the social distancing requirements and carry on as per.
It was particularly encouraging to see private housing work up 142% between April last year and January 2021.
It helped that the supply chain was able to continue fairly uninterrupted, with building materials’ pricing remaining fairly steady.
The data also implies a lot about the health of the economy – and the sector – as we went into the pandemic. We’re not far off where we would have been had we not experienced the past 12 months. Frankly, it’s defied expectations.
2020 avoided an 'unvirtuous circle'
Technically, it’s important to bear in mind that the downturn wasn’t a liquidity issue, as was the case with the financial meltdown of 2008. By contrast, 2020 didn’t see banks and other lenders pulling down the shutters, which is often the case at the start of an economic crisis.
There was no spiralling into an ‘unvirtuous circle’, where everything goes to the wall.
And the pandemic hasn’t created a slump in buyer demand. Quite the opposite, in fact. Transaction data has gone through the roof. Seasonally adjusted figures for January 2021 show housing transactions went up by 25% year-on-year. A hot property market gives developers and the housing market a lot to work with, and that’s the case here. Which gives us a lot to be positive about.
We might not need the champagne yet, but we can look forward to it soon.