Construction to maintain post-referendum momentum, yet fortunes are mixed
The Construction Products Association has released their latest construction forecasts, showing that construction output is expected to grow by 0.8% in 2017, 0.7% in 2018 and 2.2% in 2019. Whilst showing that construction will maintain its post-Referendum momentum, these forecasts are also masking considerable variation in fortunes across key construction sectors.
Deloitte’s latest annual crane surveys, analysing the number of new construction projects across the main regional cities in the UK, reports that the construction industry seems to be showing no sign of suffering a Brexit-related slowdown. The surveys highlights the link between development and prosperity when examining key market drivers for city centre construction, especially in northern UK.
The Prime Minister has set out the plan for Britain exiting the EU, including the 12 priorities that the government will use to negotiate Brexit. In preparation for a post-Brexit Britain the government have published its Industrial Strategy for 2017 as a Green paper. This is covered in more detail in our post: A modern Industrial strategy – can construction work smarter?
The Brexit effect on sterling’s exchange rate has caused issues for contractors and construction clients. The sharp fall in sterling has increased their costs on imported materials and components, forcing them to ensure that this impact is costed into future projects. Also Clients will now need to take greater risks on project decisions, whilst suppliers will need to do the same when it comes to pricing. This then creates the question of whether the adversarial tactics of previous downturns will make a comeback?
The ONS have released their Construction Output in Great Britain: December 2016 figures, showing that construction output rose by 1.8% compared to November 2016, with private commercial work being one of the main drivers behind construction growth.
The Markit/CIPS UK Construction PMI January report shows the weakest construction activity growth since September 2016. The Index registered 52.2 in January 2017, a decrease from 54.2 in December 2016, signalling the weakest expansion of growth for 5 months. Complementing this, the latest Economic & Construction Market Review from Barbour ABI, shows that the number of construction projects declined by 3.2% in 2016, from 11,857 to 11,478. This compares to a fall of 4.7% in 2015, and differs from the growth seen in both 2013 and 2014.
The NHBC have released their latest annual home registration statistics showing that, 151,687 new homes were registered in 2016, the second highest in a decade, but a decrease of 2% from 155,504 when compared to the total in 2015. However new home registrations in London have fallen by a third.
The Halifax House Price Index reports in January 2017 house prices decreased by 0.9% compared to December 2016, with annual house price growth easing to 5.7%. However the Nationwide House Price Index reports that in January 2017 house prices were just 0.2% higher than December 2016 and annual house price growth decreased to 4.3%, but remains broadly stable.
Timetric have published their report: Residential Construction in the UK to 2020: Market Forecast, which contains historic and forecast market value data for the residential sector and includes a breakdown of data by construction activity.
The National Audit Office has published an overview of the housing market in England, including the DCLG’s housing strategy and the overall housing policy landscape. And the House of Commons have written a briefing paper considering key trends in the UK housing supply, focusing on some of the of the key barriers and potential solutions to increasing housing supply in England. The Government has published its white paper “Fixing our broken housing market”, which sets out a broad range of reforms that they plan to introduce to help change the housing market and increase the supply of new homes. Read more in our post How will the housing market respond to being fixed?