An uncertain picture for construction going into 2018

Despite talks with the government for a deal Carillion PLC has collapsed and entered into compulsory liquidation. The company has £900m worth of debt and a £587m pension deficit. This collapse puts thousands of construction jobs at risk and will affect many smaller contractors who were working on projects with them. Adding further uncertainty to the marketplace.

Various commentators reported a slowdown at the end of 2017, although November does seem to have performed better than October.

The CPA’s State of Trade Survey for 2017 Q4, reported that the sector lost pace at the end of 2017 and is expected to weaken in 2018 as inflation continues to rise, economic growth slows, and the UK’s post-Brexit deal still remains unclear.

The IHS Markit/CIPS UK Construction PMI January 2018 report also shows that construction output growth eased slightly in December 2017. The Index registered 52.2 in December down from 53.1 in November, remaining above the 50.0 neutral mark for the 3rd month running, signalling a moderate expansion of overall output at the end of 2017.

The latest CBI growth indicator shows that growth in manufacturing activity accelerated in the 3 months to December 2017, with all sectors reporting robust growth in the last quarter at a pace above their long-run average. However, growth is forecast to stall across the services sector and to slow in distribution and manufacturing over the first 3 months of 2018.

The ONS released their Construction output in Great Britain: November 2017 figures, showing output on a 3 month on 3 month basis contracted for the 6th consecutive period by 2.0%. This contraction represents the largest fall in output since August 2012. How-ever on a month on month basis, in November construction output increased by 4.0%.

The latest Economic & Construction Market Review from Barbour ABI also shows an increase in construction activity for November, as the value of new contracts awarded reached £7.4bn based on a 3-month rolling average. This is an 8.4% increase from October 2017 and a 7.4% increase on the value recorded in November 2016.

The construction material price index for all work increased 5.7% in the year to November 2017 and rose 0.9% on a monthly basis. Construction materials prices for new housing, other new work and repair and maintenance rose 5.4%, 6.0% and 6.2%, respectively, in the year to November 2017.

NHBC reports that 14,942 new homes were registered to be built in the UK during November 2017, compared to 15,211 in November 2016. Making this the second highest monthly total for 2017. The Ministry of Housing, Communities and Local Governments (formerly DCLG), report that a total of 144,826 properties were purchased using the help to buy equity loan scheme, from 1st April 2013 to 30th September 2017. First time buyers account for 81% of total purchases under the scheme, with the average house price being £243,818.

The Halifax House Price Index reports that in December 2017 house prices fell 0.6% compared to November. And annual house prices eased to 2.7% from 3.9% in November. The Nationwide House Price Index reports that in December 2017 house prices were just 0.6% higher than November. And annual house price growth ended 2017 at 2.6% compared with 4.5% in 2016.

Ahead of their financial results for the year ended 31st December 2017, Persimmon plc have released a trading update anticipating pre-tax profits for the year will be modestly ahead of market consensus, with revenues of £3.42bn for 2017, a 9% increase on 2016.

 

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