Private commercial construction new work output fell by 6.5% from November 2023 to February 2024. Private commercial was the only sector of significant size to have increased in the year to November 2023, which makes the slippage more significant. The demand for grade A office space in London is driving a strong recovery in the commercial office sector. Q1 24 has had significantly more construction starts on London projects, than the average  for this period over the last decade. This has been on the back of a strong end to 2023, with London showing robust signs of recovery. This recovery is currently very London-centric, with close to 80% of the UK construction starts occurring in London.

UK construction new work output fell by 9.1% on a yearly basis in Q4 2023. The Office of National Statistics has indicated a 7% reduction to January 2024 against the same period last year. Repair and maintenance output rose by 13.4% across the same period. This subsector continues to support the industry’s momentum and keep total output levels respectable, helping to offset the reduced private housebuilding output, which was previously a large contributor to the overall volume of new work. It is worth noting that repair and maintenance activities now account for almost 45% of the overall industry output. Compared with 34% in 2019, it shows a significant shift in workloads.

Construction sentiment indicators steadied over Q4 2023 and Q1 2024. Despite subdued trends through 2023, sentiment has started to rally, albeit below the long-term averages. The industry as a whole is not particularly pessimistic and there are signs of increased activity in sectors with constrained capacity. Q1 2024 brought some optimism and green shoots of economic recovery, with talk of a potential bounce-back in 2024. The Bank of England base rate remaining at 5.25% has been a barrier to investment in new schemes. However, the Bank of England has now indicated that reduction in the base rate is more likely to happen in the summer, now that inflation is expected to be within the set targets. This will go a long way to restore confidence and alleviate the muted outlook.

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