Construction has proved a remarkably resilient sector. To get through the hard times ahead we must keep our heads and work together, says Gareth Lewis
Wherever you look at the moment, it feels like there is bad news – the war in Ukraine, worsening global economic conditions, interest rates rising again, the energy crisis and the list goes on…
However, I am pleased to note that there is one area bucking the trend. For those of us in construction, there is plenty to be proud of.
According to new GDP figures revealed by the Office for National Statistics (ONS), construction was the only major sector of the economy to grow in September. The service sector is stagnating and manufacturing was down by 2.3%. While the economy overall saw a drop in GDP by 0.6%, ours actually grew by 0.4% – the third month of growth in a row and the highest level of construction output (£15.1bn) since records began.
Yet again our industry is proving its resilience.
It is clear that construction remains in high demand, with five out of the nine sectors seeing growth, according to the ONS report. People said during the covid-19 lockdowns, with the majority of people working from home, that the commercial sector was dead, but the ONS reports that new orders are up by 27.7% in the last quarter.
It highlights particular growth in the repair, maintenance and improvement market – this is driven in part by the rise in demand for energy efficiency improvement.
We are seeing this ourselves with almost half of our new orders in our office division now being retrofits, and we hope this trend continues following the chancellor’s commitment to energy efficiency in the autumn statement.
We’ve been through downturns in the past and got through them. What is important is how the sector, both clients and contractors, respond
The “end of the office” commentary of recent times was not the only time when critics have been proved wrong. The many rumours over cuts to infrastructure spending touted for the chancellor’s statement also never materialised. In fact, it was largely positive news for the industry.
The government has recommitted to major programmes such as the new nuclear facility Sizewell C, as well as to HS2 and the New Hospital Programme. It is our industry at the coalface of delivery for these projects and programmes, and it is great to see that this government has recognised how we contribute to the national and local economies.
>> Also read: Gareth Lewis interview: how Mace is weathering the economic storm
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We should not rest on our laurels, however. Inflation in the cost of both materials and labour continues to plague the sector.
The BEIS material price index increased again by 16.7% in September compared with the same month the previous year. While there has been some easing on pricing of certain products, input prices are still at a record high.
Sadly, this has taken its toll on some subcontractors, with some big names going under in recent months. This is shocking when you consider that we did not see a single supplier go out of business through any of the lockdowns. We’re starting to see more struggling now, however, and, despite our ongoing support for our suppliers, unfortunately we have lost one or two this year.
Understandably, the Bank of England wants to get inflation down across the economy. It raised the base rate to 3% in November in a bid to achieve this. It hopes to see inflation fall sharply in the middle of next year, but the economy is likely to go through a downturn as a consequence.
We should not fear this as an industry. We’ve been through downturns in the past and got through them. What is important is how the sector, both clients and contractors, respond. The worst thing we could do is panic.
If we try to reduce risk down the supply chain, then we will only be racing to the bottom. Instead, we need to work together as an industry – as we did so well through the pandemic – to weather any approaching economic storm and come out of it safe and dry.
Yes, the winter will be tough, but let us keep focused on what we do best: constructing brilliant buildings and infrastructure, making our mark on the skyline and providing brilliant careers.
Gareth Lewis, CEO, Mace Construction
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