Construction Sector Business Investment Still Suffering

Business investment in the construction industry collapsed 21% annually in Q1, analysis of the latest ONS data by business tax relief specialists Catax reveals.

Business investment in the construction sector declined £892m between January and March compared to Q1 2020, dropping from £4.3bn to £3.4bn. However, this was a 16.9% improvement on Q4 2020.

On an annual basis, the industry’s performance was worse than UK industry as a whole, which posted a 16.9% annual fall across all sectors, dropping an estimated 10.7% on a quarterly basis to sit 17.3% below pre-pandemic levels (Q4 2019).

Business investment in the construction industry is now 29.1% below its record high of £4.7bn recorded in the final quarter of 2019, after which it fell 10.2% at the start of last year as the impact of the pandemic began to be felt.

Meanwhile, business investment in new building work was down 6.9% annually in Q1 to £927m, well short of the record high of £1.3bn recorded in Q3 2019.

By comparison, UK GDP shrank 1.6% in the first quarter, down 6.1% year on year and 8.8% below pre-pandemic levels at the end of 20193.

Mark Tighe, CEO of business tax relief consultancy Catax, comments: “There are signs of improvement recently but it’s disappointing to still be counting the cost of the pandemic, which hit the industry hard in the first quarter of last year and is still reflected by relatively weak figures.

“Despite leaving the rest of the country in the dust with its impressive quarterly growth, the construction sector has still underperformed the rest of the UK on an annual basis.

“It is extremely likely that business investment will show a strong year-on-year rise next time out because of the slump seen at the start of last year, but this will mask what will still probably prove to be a relatively weak set of numbers. The true test will be how quickly it can recover to pre-pandemic levels.”