What does the Brexit vote mean for the construction sector? Here is a summary of how the construction market has reacted.
The UK economy was adversely affected by uncertainty prior to the EU referendum. This uncertainty has continued following the Brexit vote. Rain Newton –Smith, chief economist for CBI, goes through what the economic impact of the Brexit vote could be, explaining that the effects will happen over the medium to long term and will depend on many factors including business and consumer confidence.
Ironically the slump seen in sterling may boost the UK steel industry. Sources close to Tata say that the company is continuing to work with the government to keep its UK business, and that as a result of the slump in sterling’s value, the industry could benefit.
Overall the uncertainty has had a similar impact on construction forecasts to that of the economy as a whole. In the first half of the year the CPA saw reduced confidence in construction, undermining their forecast of 3% growth for 2016.
This uncertainty has continued following the Brexit vote. Glenigan hosted their annual breakfast briefing at the beginning of July, where they presented their revised forecasts for 2016/17 following the Brexit vote. Allan Willen Chief Economist for Glenigan described how the markets had slowed pre-referendum. He then went onto explain how growth would continue for the education and healthcare sectors balancing out a cooling in the private housing market, and that infrastructure is a possible area for growth in the post Brexit economy. It was also mentioned that Brexit could have a larger negative impact by reducing employment and causing a skills and materials shortage.
The Institute of Civil Engineers has released its report State of the Nation: Devolution 2016. This supports the Government’s devolution agenda and sets out a number of steps ICE consider are necessary to ensure the agenda impacts positively on local, regional and national infrastructure networks.
The past few years’ construction growth has been driven primarily by housing. Hewes and Associates, in their latest forecasts, expect housing workloads to decline over the next few years and a recession to emerge in 2017, which can be attributed in the most part to Brexit. For more detail on this then hear Martin Hewes talk at the next CIMCIG seminar: Construction Forecasts after the Referendum – 21st July.
The NBS have released the findings from an EU referendum survey with the uncertainty already having an impact with a fifth reporting they have had at least one project cancelled or put on hold.
In contrast Persimmon are confident that the Brexit vote will not impact performance as they released a trading update ahead of half year results to 30th June 2016, showing revenues of £1.49bn, 12% ahead of their 2015 revenues. And Kier Group, in their trading update for year-end 30th June 2016, say that the EU Referendum has not had a significant impact on business, but has created uncertainty. They do though have a healthy pipeline of projects totalling more than £1bn.
BSI has published a document in response to the Referendum, comprising of a set of questions and answers concerning voluntary business standards in the European Single Market and the possible impacts of the UK leaving the EU. They have also published a one hour webinar, EU Referendum – the UK’s future role in developing European standards. This webinar aims to answer questions on the EU referendum result and the UK’s future role in developing European Standards.
CIMCIG are hosting an evening seminar in London on 21st July where Martin Hewes of Hewes Associates, will be giving his opinions on what to look out for as influences on forecasts, and the possible impacts following the referendum. The seminar is aiming to give those who attend a better idea of what to expect in the coming months following Brexit.