Mixed figures reported for construction as government announces Construction Sector Deal to transform productivity.

Government have announced their Construction Sector Deal. The deal sets out an ambitious partnership between the industry and the government to transform the sector’s productivity.

It covers five areas: ideas, people, infrastructure, business environment and places. The deal aims to:

  • Invest £420m of investment in ‘bytes and mortar Smart Construction’
  • Use this investment to transform construction through the use of digital building design, new manufacturing technologies and offsite manufacturing
  • Enable a 50% reduction in the time taken to deliver new build
  • Deliver cheaper energy bills for families and businesses – supporting the Industrial Strategy mission to halve the energy use of new builds by 2030
  • Achieve 25,000 construction apprenticeship starts and 1,000 Construction T-Level placements by 2020 – with £34m to scale up innovative training models across the country
  • Achieve $2.5 trillion of global exports – a globally-competitive sector targeting the growing international infrastructure market that is set to grow by 70% in the years ahead

The Construction Products Association have responded to the new construction sector deal by saying “These are ambitious plans that will improve and modernise the construction sector, whilst providing much-needed reassurance to the supply chain as Brexit-related uncertainty continues to weigh on activity.” And CBI has also commented on the new deal saying “Businesses will welcome the Construction Sector Deal, which firmly recognises construction’s indispensable role in driving growth across the UK as part of the Industrial Strategy.”

Construction Market Overview:

The IHS Markit/CIPS UK Construction PMI June 2018 reports that construction output reached a 7 month high in June. The Index registered 53.1 in June, an increase from 52.5 in May, with new orders rising at their fastest pace since May 2017. This though is in contrast with other market activity figures.

The ONS report that Construction output fell by 1.7% during the three-month on three-month period to May 2018, representing a third consecutive decline in this series. This was mainly driven by a fall in new work, which also fell for the third consecutive month, decreasing by 2.5% in May. And the June Economic & Construction Market Review from Barbour ABI shows the value of new construction contracts awarded in May 2018 to be £4.5bn, based on a 3 month rolling average. This is a decrease of 8.9% compared to April, and 8.0% lower than May 2017. Although figures are more optimistic in the immediate term. With the ONS reporting that construction output showed signs of recovery in May 2018, increasing by 2.9% compared with April 2018.

This optimism is shown in the May RIBA Architects’ Future Trends Workload Index, which has returned to a positive outlook, with the expectation that workloads will increase in the medium term. It shows a rise at +24, up from +13 in April. With practices in London the most pessimistic about medium term workloads, but with a balance figure of +16.

The construction material price index for all work increased 4.9% in the year to May 2018, compared to a year ago. Construction material prices for new housing, other new work and repair and maintenance rose 5.0%, 5.0% and 5.5%, respectively, compared to a year ago.

Residential markets are also subdued. With the Ministry of Housing, Communities and Local Government reporting that private housing starts totalled 33,960 in Q1 2018, 3.2% lower quarter-on-quarter and 5.1% lower than Q1 2017. With private completions decreasing 9.3% quarter-on-quarter and 5.0% year-on-year. Yet the NHBC figures show in May 2018 a total of 14,753 new homes were registered to be built in the UK, 1% up on the May 2017 figure of 14,662. With 11,126 new homes registered in the private sector (10,123 in May 2017), and 3,627 registered in the affordable sector (4,539 in May 2017). The ONS also report an increase with the number of residential property transactions up by 0.8% in May 2018 when compared to April 2018. Yet this is 0.4% lower than the same time last year, marking a 5th consecutive month of annual decline.

UK Finance report the number of mortgage approvals for house purchase decreased 4.3% year-on-year in May, the eighth consecutive month of annual decline, despite an increase of 2.4% on a monthly basis. The value of these loans also decreased 0.5% from a year earlier but rose 5.1% month-on-month. The Halifax House Price Index reports that in June 2018 house prices were 0.3% higher than May. And the Nationwide House Price Index reports that in June 2018 house prices increased 0.5% compared to May. Nationwide also report a softening of annual house price growth to 2.0% in June from the 2.4% recorded in May. Yet Halifax reports that annual house price growth remains flat at 1.8% in June.

According to the latest RICS Residential Market Survey, the UK housing market saw a stable trend in new instructions in May, with the number of homes coming onto the housing market turning positive for the first time in over two years. However overall housing activity remains flat and looks unlikely to gain any momentum in the near future.  With buyer demand continuing to decline, but to a lesser extent than at the start of 2018.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>