Construction output seems likely to contract further before returning to growth in 2025.

Figures for the final quarter of 2023, released in the latest BMF Builders Merchants Building Index (BMBI) confirm the extent of the downturn in construction during the quarter and over the course of the year, with annual sales values falling by -5.1% compared with 2022, after two years of strong growth.

Quarter 4 2023 v Q4 2022

Year on year total sales values for Q4 2023 fell by -5.7% compared to Q4 2022.  Volume sales were -12.0% down, whereas prices were up by +7.1%.

With one more trading day in 2023, like for like sales during Q4 were -7.3% lower than in 2022.

On a category level, Timber & Joinery Products (-10.3%) contributed most to the Q4 on Q4 decline in sales value.  But all three of the largest categories sold less with Heavy Building Materials down by -7.3% and Landscaping down by -6.7%.

Six of the 12 categories did see value growth, including Workwear & Safetywear (+8.6%) and Decorating (+7.1%).

Quarter 4 2023 v Q3 2023

Comparing sales in Q4 2023 with the third quarter of the year, total value sales dropped by -15.7% in Q4. Volume sales were -19.8% down, while prices were up by +5.1%.  With four fewer trading days in the most recent quarter, like for like sales were -10.1% lower in Q4 over Q3 2023.

Plumbing, Heating & Electrical (+4.4%) was one of only two categories to show quarter on quarter value growth, with the smaller Workwear & Safetywear category up +17.0%.

Landscaping (-33.2%), a seasonal category, was the largest negative contributor, followed by Renewables and Water Saving (-20.9%), Heavy Building Materials (-17.4%) and Timber & Joinery Products (-15.1%).

Full year 2023 v 2022

The effect of rising prices and falling volumes can be seen in the full 12-month comparison of 2023 and 2022. Annual sales values fell by -5.1%, but this annual headline figure  represents a fall in sales volumes of -13.7%, and price growth of +10.0%. 

With two more trading days in 2023, overall like for like sales were -5.9% lower than 2022.

On a category level Heavy Building Materials saw a full year value decline of -3.2%, a volume decline of -17.7% and price growth of 17.6%. Other value indicators shows Landscaping down by -11.9%, with Timber & Joinery Products down by -14.4% due to a price decline of -14.6%. Decorating and Kitchens & Bathrooms were up by 9.0% and 3.2% respectively.

Emile van der Ryst, Senior Client Insight Manager – Trade at GfK, said: “Economically, 2023 will go down as one of the worst in recent memory for the UK, with ONS figures indicating a technical recession at the end of 2023. This backdrop had a noticeable impact on the merchanting sector.

"While a challenging year was widely expected within the sector, the extent of it wasn’t.  2024 should see a continuation of the challenges seen towards the end of 2023. However, price growth as measured in the BMBI should noticeably drop off in the coming months, while volumes should recover in the second half of the year, hopefully paving the way for a market returning to growth in 2025.”

John Newcomb, CEO of the Builders Merchants Federation, said: “It has been yet another challenging quarter for construction, concluding a year that most of us would like to forget.  Construction output seems likely to contract further before returning to growth in 2025.  

"But with an election on the horizon, the Chancellor may look to stimulate the housing market in his Spring Budget, while the Governor of the Bank of England has not discouraged market speculation on a series of interest rate cuts later in the year. 

"Taking a more optimistic view, the market could take a positive turn in the second half of 2024.  But we are not holding our breath.”