Could this be the end of recent positive market activity, impacted by Brexit uncertainty?
Barbour ABI data shows that all construction contract activity increased 28.9% in August compared to July 2018, with the value of contracts awarded in August now standing at £6.0bn. This data indicates a continuation of the positive conditions experienced in July, showing an upwards movement in contract awards and number of contracts since June 2018. Yet more recently Barbour ABI data shows that all construction contract activity decreased 6.1% in September compared to August 2018, with the value of contracts awarded in September now standing at £5.6bn.
The Construction Material Price Index for all work increased 5.6% in the year to August 2018, yet it remained broadly flat at 0.1% on a monthly basis. Construction material prices for new housing, other new work, as well as repair and maintenance rose by 5.0%, 6.1% and 6.0%, respectively in the year to August.
The ONS report that construction output declined by 0.7% in August when compared to July 2018, driven by falls in both repair and maintenance and all new work. However they also report that construction output grew by 2.9% in the three months to August 2018, showing continuing recovery following a relatively weak start to the year. This growth was driven by an increase in both repair and maintenance, and all new work, which increased by 2.8% and 2.9% respectively.
Kier Group have released their latest results for the year ended 30th June 2018 showing strong market-leading positions and record order books of £10.2bn, providing them with confidence for the future. But Kier’s management has promised to address the contractor’s spiralling debt after reporting a 17% increase in net debt. A new study from accountancy firm Moore Stephens reveals that since the collapse of Carillion the number of construction firms entering into insolvency increased by 20%.
SIG group Plc has blamed what it called a “challenging” UK market for a near-22% slump in profit in the first six months of 2018. Group turnover for the six months to the end of June 2018 rose 1% to £1.36bn but underlying pre-tax profit fell 21.8% to £26.9m.
The IHS Markit/CIPS UK Construction PMI for September 2018 shows construction output growth at its weakest level of expansion in the construction industry for six months, despite a sustained increase in business activity. The index registered 52.1 in September, down from 52.9 in August, with all three sub-sectors recording a loss of momentum, with civil engineering being the worst performing. IHS Markit/CIPS data also shows that business confidence for the year-ahead overall is among the lowest since the start of 2013, as construction companies continue to note that political uncertainty and Brexit worries are encouraging a wait-and-see approach to spending on construction projects.
Despite recent market figures The Construction Products Association’s latest State of Trade Survey for Q3 2018 shows that construction product sales increased in Q3 2018, with manufacturers anticipating growth continuing into Q4 2018. Manufacturers also reported that labour cost pressures began to subside in Q3, despite cost inflation for fuel and raw materials remaining elevated. Also, despite rising material and labour costs, three in four engineering services organisations (77%) say turnover increased or remained steady in Q2 2018, according to the BESA/ECA/SELECT/SNIPEF quarterly sector-wide Building Engineering Business Survey.
NHBC’s latest new home registration statistics show that 42,547 new homes were registered to be built in the UK between June and August, an increase of 11% on the 38,296 registered 12 months ago. With strong growth reported in London due to a considerable increase in the number of private rental sector developments and large housing association projects. Inland Homes have announced the construction of nearly 700 homes at their year-end to June 2018, up from 427 last year, with a near 7% rise in annual pre-tax profit after posting a 63% increase in turnover over the year.
Recent housing transactions show another month of annual decline. In August 2018, the number of property transactions in the UK totalled 99,120 according to HMRC, a 1.3% increase from July and 2.6% lower compared to a year earlier. This marks the eighth consecutive month of annual decline.
According to the Bank of England, in August, the number of mortgages approved for house purchase decreased 0.4% year-on-year, the eleventh consecutive month of annual decline but rose 2.0% on a monthly basis. With the value of these loans being 2.4% higher than a year ago.
UK house prices rose to 3.1% annually in July 2018, down slightly from 3.2% in June and marking the lowest annual growth since August 2013 according to the ONS. By nation, house prices grew 3.0% in England, 4.2% in Wales and 3.2% in Scotland in July.
The Halifax House Price Index reports that in September 2018 house prices decreased 1.4% compared to August. The Nationwide House Price Index reports that in September 2018 house prices increased 0.3% compared to August, with annual house price growth remaining steady at 2.0%. Yet Halifax report that annual house price growth slowed to 2.5% in September from the 3.7% seen in August.
The Cambridge Centre for Housing & Planning Research has published their report on the uptake of digital tools in the UK house building sector. In summary, it concludes that the potential benefits from the adoption of BIM have been recognised within the sector but take-up has been slow, with down-stream adoption by small sub-contractors over many sites difficult.