The latest mid-year forecast for 2017 from Glenigan shows that political uncertainty and doubts over the Brexit negotiations are slowing the construction industry’s prospects for the next 2 years. The forecasts suggest that the total value of underlying new project starts is set to rise by just 1% in 2017 and a further 2% in 2018. Reflecting this uncertainty, the CPA has downgraded growth prospects for construction in 2018. In their latest forecasts the CPA expect construction growth for 2018 to rise 0.7%, the slowest in 6 years, a downwards revision form 1.2% in previous forecasts. And the CPA’s latest State of Trade Survey shows that despite a strong Q2 construction’s supply chain is more pessimistic for the year ahead. This view is due mainly to Sterling’s depreciation since the EU referendum, causing cost pressures and rising prices of imported materials.

The ONS have released their Construction Output in Great Britain: June 2017 figures, showing that construction output fell 1.3% on a 3 month on 3 month basis, after a growth of 1.1% in the first 3 months of 2017. Output also fell 0.1% in June compared to May 2017, but still grew 0.9% compared to June 2016. And the IHS Markit/CIPS UK Construction PMI July 2017 report shows the weakest construction performance since August 2016, with commercial work falling at its fastest pace for 12 months. The Index registered 51.9 in July, down from 54.8 in June 2017, this reading was below the long-run survey average of 54.5 and points to only a moderate pace of business activity growth.

In contrast, the July Economic & Construction Market Review from Barbour ABI shows that all contract activity witnessed a rebound in June, as the value of new contracts awarded based on a 3 month rolling average reached £5.5m. This is a 12.4% increase from May 2017, but an 11.5% decrease on the value recorded in June 2016. And according to BEIS, the construction material index for all new work increased 4.7% in the year to June 2017, whilst no growth was reported on a monthly basis.

The UK residential land market has been dominated by the major house builders since 2009. However the past year has seen a significant rise in the number of small and medium sized house builders and housing associations building more homes, supported by Government funds and more accessible finance. Alongside this build to rent developers and investors are also increasingly active in the market, driving the price of land in regional cities upwards. A new study from Glenigan covering detailed planning applications for new-build housing made by registered social landlords (RSLs) or housing associations during 2016 reveals the number of affordable housing units in the planning pipeline leapt by nearly 20% last year, to its highest level for six years. Returning to this year, the NHBC reports that 40,343 new homes were registered during the period April-June 2017, 1% down on 12 months ago.

According to the report from IHS Markit and CIPS UK Construction PMI, last month saw residential building outperform commercial construction and civil engineering activity, despite the most recent increase occurring at the slowest pace in three months. Government, in response to Mark Farmer’s independent review has said they are ‘… determined to ensure more houses are built more quickly, while maintaining quality, and is keen to work with firms that can achieve these goals through innovative construction methods.’ This approach, together with amendments to land and planning are assisting housing.

The Halifax House Price Index reports that July 2017 house prices increased 0.4% compared to June, with annual house price easing further to 2.1%, becoming the lowest annual rate since April 2013. The Nationwide House Price Index reports that in July 2017 house prices were 0.1% higher than June. And annual house price growth decreased to 2.9%, remaining outside the 3-6% range that has been prevailing since early 2015.

Two of construction’s biggest names, Balfour Beatty and Carillion have both suffered financial issues in the last couple of years. Balfour Beatty is only just holding on to a top 10 place in the latest Glenigan league tables, as the group’s order book has shrunk by a third to £1,155.8m from £1,743.5m in Q2 2016. And Carillion’s latest awards total is down 37% to £975.7m from £1,546.9m in Q2 2016, meaning they are only just holding on to 18th place in the top 20 contractor list.

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>