EU referendum uncertainty is stalling construction growth
There are clear signs that uncertainty around the EU referendum is concerning businesses. The latest CBI Growth Indicator showed the pace of growth in output across manufacturing, distribution and service sectors for May 2016 was broadly similar, with a balance of 11% of firms reporting a rise in May 2016, compared with 10% in April 2016. Firms though are expecting to see growth again over the coming 3 months, with a balance of +13%, but expectations are well below the average seen over the previous three years (+26%).
UK Construction Week’s EU Referendum survey, which received over 3,000 responses, has revealed that 57% of construction professionals want to remain in the EU and 43% wish to leave. This survey formed the framework for the latest UK Construction Week EU Referendum advisory panel where panellists debated the pros and cons of leaving the EU.
Investor activity in the commercial property market has slowed sharply in recent months according to Property Archive Data, with the Bank of England reporting that the decline is partly due to uncertainty ahead of the EU referendum.
The Markit/CIPS UK Construction PMI shows output growth easing to its weakest for almost three years and incoming new work declining for the first time since April 2013. The index registered 51.2 in May 2016 signalling the weakest overall rise in business activity for almost three years.
The ONS have released their Construction output in Great Britain: April 2016 and new orders Jan to March 2016. Output was estimated to have increased by 2.5% in April 2016 compared to March 2016, with all new work increasing by 2.9% and all repair and maintenance increasing by 1.9%. However compared with April 2015 output decreased by 3.7%.
New orders for the construction industry in Q1 2016 were estimated to have decreased by 1.2% compared with Q4 2015 and decreased by 1.2% compared with Q1 2015. In summary ONS report a monthly increase in output and new work, as well as repair and maintenance, however new orders have decreased.
The residential sector remains strong with NHBC announcing that the number of new homes registered in April 2016 was 14,228; a 17% increase compared to April 2015, when 12,201 were registered. Completed new homes also increased by 4% in April 2016 when compared to a year ago. The Homes and Communities Agency has awarded Keepmoat with £18.3m through the Builders Finance Fund, with the aim to accelerate the delivery of 2000 new homes across the UK.
The Nationwide House Price Index reports that in May 2016 house prices increased by 0.2%, with annual house price growth slowing to 4.7%. The Halifax House Price Index reports that in May 2016 house prices increased by 0.6%, and house prices in the last 3 months (March-May) were 1.4% higher than the preceding 3 months. They also report that annual house price growth remained unchanged at 9.2% in May.
Tata Steel UK has announced the completion of the sale of its Long Products Europe business to Greybull Capital LLP. This deal will see the return of the British Steel brand and save thousands of jobs in the industry.