A mixed view for construction at the end of 2018
The ONS report that construction output recorded an all-time high in November 2018 as the month-on-month series grew by 0.6%, resulting in the total value of construction output exceeding £14bn for the first time since monthly records began in 2010. All new work increased 2.1% in a three-month on three-month series for November 2018, driven mainly by private new housing and infrastructure which increased by 4.9% and 6.5% respectively.
However the IHS Markit/CIPS UK Construction PMI for December 2018 indicates a disappointing end to 2018, as business activity growth eased to a three-month low and new orders expanded at a relatively subdued pace. The index registered 52.8 in December; down from 53.4 in November, reading above the crucial 50.0 no-change value for the ninth consecutive month, but signalling only a modest rate of expansion at the slowest pace seen since September 2018.
The Economic & Construction Market Review from Barbour ABI shows the value of new construction contracts awarded in November 2018 was £4.6bn, based on a 3 month rolling average. This is a decrease of 13.9% compared to October and 34.7% lower than November 2017. This is the third month in a row that the value of new construction contracts awarded has decreased, but the outlook remains cautiously optimistic, despite the potential for some flattening of output levels in the short to medium term.
NHBC’s latest new home registration statistics show that 43,745 new homes were registered to be built in the UK during September to November, an increase of 7% on the 40,858 registered in the same period 12 months ago. Commenting on these figures NHBC say “As we reach the end of the year it is reassuring to see continued strong new home registration numbers, with growth across the majority of the UK.”
According to the Bank of England, in November, the number of mortgages approved for house purchase decreased 1.7% on an annual basis, a decrease of 4.5% when compared to October. The value of these loans was 1.2% higher than a year ago but is a 2.7% decrease month-on-month.
According to the ONS UK house prices fell by 0.2% on a monthly basis in October, but grew by 2.7% in the year to October 2018, but a decrease from the 3.0% in the year to September 2018. This is the lowest annual growth for the UK since July 2013, when house prices increased by 2.3%.
There were mixed reports on the housing market for December, with Halifax reporting an increase in prices and Nationwide a decline. The Halifax House Price Index reports that in December 2018 house prices rose 2.2% compared to November, and in the three months to December increased 1.3% compared with the same period a year earlier. But the Nationwide House Price Index reports that in December 2018 house prices decreased 0.7%, and increased 0.5% on an annual basis reporting the weakest annual rate seen since February 2013. Looking to 2019, Halifax expects annual house price growth to be in the range of 2% and 4% however this will be dependent on the Brexit. And Nationwide report that the slowdown seen reflected the impact of economic uncertainty on buyer confidence.
Brexit still causing uncertainty for construction
With Teresa May losing the vote for her Brexit option in the House of Commons, uncertainty is still growing and has the potential to further damage construction growth in the future. One of the biggest concerns for construction would be a general election; this would lead to a further decline in the value of sterling and increased pressure on material prices, pushing up overall construction costs. Also, due to this increased uncertainty, many projects are being put on hold or delayed once again, as clients wait to see how or if we will exit the EU and if there will be a deal or not. This is damaging investment and the potential growth the industry could see if we were to enter a more stable political climate.
A changing construction Industry
The government has announced its intentions regarding the implementation of the Hackitt Review. In its report Building a Safer Future it sets out how it intends to take forward all of the recommendations in the Hackitt review, creating a more effective regulatory and accountability framework to provide greater oversight of the industry. It has committed to introduce clearer standards and guidance, including establishing a new Standards Committee to advise on construction product and system standards and regulations. It is hoped this will help create a culture change and a more responsible building industry, from design, through to construction and management.
In response, two architects from Allford Hall Monaghan Morris architects set out what specifiers need from fire safety product manufacturers, but many of the comments apply equally to other building products. They suggest making products easily discoverable on websites by using Uniclass 2015 or similar. They would also like to see all products indelibly labelled so that installed products can be identified and linked back to their specifications.
And finally, following the publication of the report “Off-site manufacture for construction: Building for change” earlier in the year by the House of Lords Select Committee for Science and Technology the government has now published its response, indicating how it will move forward with an ambitious new sector deal.