New work was hit hardest dropping by 2.3% with repair and maintenance decreasing by 1.4% during the month.
Despite the uptick in output in January, construction new work output in the last three months to February contracted by a total of 3%.
Scott Motley, head of programme, project and cost management at consultant AECOM, said: “The construction industry will be dismayed that output has slipped back into decline, as firms struggle to gather momentum in a sector that hasn’t notched up consecutive months of growth since 2022.
“Longer term prospects are improving though, with the Bank of England poised to begin cutting rates – boosting development activity as we enter the warmer months.
“However, firms will still need to be alert to persistent challenges – namely elevated labour costs and an increasingly competitive tender market – which are hampering contract delivery while squeezing margins.”
Allan Kelly, restructuring advisory partner at accountant FRP, said the latest figures outlined the construction industry’s uncertain state, having posted growth at the very start of the year.
“Overall output is heavily linked to the house building sector, which has been subdued by high interest rates for more than 18 months now and continues to act as a drag on performance,” he said.
“With the base rate forecast to fall in the coming months, inflation dropping and the government having recently published its long-awaited guidance on second stairways in tall buildings, contractors will be hopeful of a resi-led recovery through the course of the summer.
“Insolvency levels are likely to remain high for the foreseeable future though,” he warned.
“Trade credit terms have become tougher due to recent collapses, while the winter’s poor weather has held up projects and put a strain on cashflow.
“This at a time when the cost of doing business remains elevated and firms continue to work through the effects of previous inflation on contracts.
“13-week rolling cashflow forecasts should very much remain the tool of choice for management teams trying to manage order books effectively.”
