Recent construction figures show mild growth despite a decline forecast for 2018

Construction output grew by 3.3% in the three months to July 2018, the ONS report, this was driven by growth in both repair and maintenance, and all new work, which increased by 5.3% and 2.3% respectively.

The ONS also report output grew by 0.5% in July when compared to June 2018, mainly driven by a 4.0% increase in new private housing. Barbour ABI also report an upturn, as their data shows that all construction contract activity increased 6.5% in July compared to June 2018, breaking the 3 months of decline. However, data for July 2018 was 13.1% down from the figure reported by Barbour ABI in July 2017.

These recent positive figures do not yet reflect the fall forecast by The Construction Products Association’s Summer Forecasts, anticipating that growth for the whole of 2018 will fall 0.6%. And despite these positive figures, the IHS Markit/CIPS UK Construction PMI shows construction output growth eased to a three month low in August 2018. The Index registered 52.9 in August, with the rate of growth at its weakest since May. This is a decrease from July’s 14 month peak of 55.8.

The construction material price index for all work increased 5.8% in the year to July 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 5.3%, 6.4% and 6.2%, respectively in the year to July. The Builders Merchant Building Index also reports growth, with a 7.2% growth in sales value compared to Q2 2017, with sales through UK builders’ merchants bouncing back in Q2 2018. This strong performance in Q2 contrasts markedly to a weather-hindered performance in the first quarter of the year.

NHBC’s latest new home registration statistics show that 43,600 new homes were registered to be built in the UK between May and July, an increase of 11% on the 39,421 registered 12 months ago.

Barratt Homes have completed 17,579 homes in the year to June 2018, with their pre-tax profit jumping 9% to a record £835.5m and their revenue increasing by close to 5% at £4.9bn. Barratt Homes have also said that as the country’s largest housebuilder, they want to build 20,000 homes a year after having now completed their highest number of homes in the past decade.

In contrast recent housing transactions show a decline. In July 2018, the number of property transactions in the UK totalled 99,270 according to HMRC, a 0.8% decrease from June and 3.2% lower compared to a year earlier. This marks the seventh consecutive month of annual decline.

UK Finance reported that the number of mortgage approvals for house purchase decreased 4.3% year-on-year in July, the tenth consecutive month of annual decline, and falling 1.8% on a monthly basis. The value of these loans increased 2.3% from a year earlier but fell 0.8% month-on-month. However according to the Bank of England, in June, the number of mortgages approved for house purchase saw a greater decrease of 6.1% year-on-year, and a month-on-month decrease of 0.9%. With these figures showing that mortgage approval volumes have declined on an annual basis since October 2017.

The Regional Construction Hotspots in Great Britain 2018 report from The Construction Products Association and Barbour ABI shows that London’s house builders have been outpaced by the rest of Great Britain, as investment in housebuilding dropped to its lowest value in six years. Residential contracts awarded in London in 2017 were 34% lower than the value awarded in 2016, which is in contrast to the majority of regions outside of the capital that experienced growth.

The Halifax House Price Index reports that in August 2018 house prices remained steady as they were just 0.1% higher than July. The Nationwide House Price Index reports that in August 2018 house prices decreased 0.5% compared to July, the largest monthly fall since July 2012. Nationwide report annual house price growth softened to 2.0% in August from the 2.5% recorded in July. Yet Halifax report that annual house price growth rose to 3.7% in August.

And finally, Construction news have released the top 100 UK Contractors. These latest rankings show the average pre-tax margin for the 10 largest UK contractors has fallen to 0.9%. With evidence of firms tightening their belts by reducing dividend payments and hoarding cash ahead of Brexit, as they seek to avoid becoming the next Carillion.

 

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