At the end of November the Chancellor delivered his Autumn Budget. Following this the Office for Budget Responsibility (OBR) downgraded the projected economic growth rate, blaming it on weak productivity. The OBR cut growth forecasts from 2.0% to 1.5% for 2017/18, looking ahead to 2021 instead of the projected 2.0% the economy is also expected to grow just 1.5%.
The CPA has responded to the latest budget, summing up all the relevant points for construction and the wider economy. The key point being that government has reaffirmed the steps being taken to improve infrastructure delivery, and has promised to use its purchasing power to drive adoption of modern methods of construction, such as offsite manufacturing.
As confirmation of this, the Infrastructure and Projects Authority have published the updated National Infrastructure and Construction Pipeline, which projects that total infrastructure investment over a 10-year period to 2026/27 will be around £600bn. The pipeline sets out £462.7bn of planned public and private investment containing 694 projects, programmes and other investments. Of this, £244.7bn will occur between 2017/18 and 2020/21, £5.0bn higher than the £239.7bn previously estimated in December 2016.
The ONS have released their Construction output in Great Britain: October 2017 and new orders July to September 2017 figures, showing that construction output contracted for the 6th consecutive period by 1.4% on a 3 month on 3 month basis in October. However new orders saw record growth in Q3 2017, growing by 37.4% compared to Q2 2017, this was driven predominantly by the infrastructure sector as several high value new orders were awarded.
In contrast The latest Economic & Construction Market Review from Barbour ABI shows the increase in construction activity continuing into October, as the value of new contracts awarded reached £7.1bn based on a 3-month rolling average. This is a 2.0% increase from September 2017 and an 18.1% increase on the value recorded in October 2016. The IHS Markit/CIPS UK Construction PMI December 2017 report also shows that construction output rose at its fastest pace for 5 months, led by housing activity, particularly residential work. The Index registered 53.1 in November up from 50.8 in October, remaining above the 50.0 neutral mark for the 2nd month running.
The latest monthly CBI industrial trends shows that growth in manufacturing activity accelerated in the 3 months to November 2017, to make manufacturing orders the strongest for nearly 30 years. However, uncertainty continues to hold back investment in manufacturing as cost pressures remain strong.
The construction material price index for all work increased 5.8% in the year to October 2017 and rose 0.5% on a monthly basis. Construction materials prices for new housing, other work and repair and maintenance rose 5.9%, 5.8% and 6.3%, respectively, in the year to October 2017. According to HMRC, in October 2017 the number of property transactions in the UK totalled 105,260. The highest since March 2016, showing a 1.7% increase from September 2017, and 9.2% higher compared to a year earlier.
The DCLG reports that in England, annual housing supply totalled 217,350 net additional dwellings in 2016-17; this is 14.6% higher than in 2015-16. How-ever it remains 2.8% below its recent peak in 2007-08. And construction insurance specialist, CRL, has announced a 20% year-on-year increase in the number of new builds registered with it in the UK and Ireland. This increase is across almost all sizes of build, with medium-large builds increasing by 73% compared to the previous twelve months.
The Halifax House Price Index reports that in November 2017 house prices increased 0.5% compared to October. And annual house prices decreased to 3.9% from 4.5% in October. The Nationwide House Price Index reports that in November 2017 house prices were just 0.1% higher than October. And annual house price growth is stable at 2.5%, remaining in the 2-4% range that has prevailed since March 2017.
Finally, the construction sector has come together with one voice to warn the government of the dangers of the industry facing a ‘cliff edge’ regarding access to EU workers. In a rare show of unity, seven of the construction industry’s major trade bodies have set out what they believe to be the sector’s responsibilities and requirements in a post-Brexit labour market, creating ‘The Construction Industry Brexit Manifesto’.