RedRock Construction Industry Outlook – June 2018

The RedRock Construction Industry Outlook reviews sentiment in the UK construction industry every month, with a particular focus on the labour market.

There was little change for UK construction industry growth in May:

The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Managers Index (PMI) is eagerly awaited by the construction industry every month because it provides a good indication of sentiment in the sector. The index is compiled from feedback and surveys from some of the industry’s major players, and respondents are asked to rate general conditions in the sector for production, employment, prices, deliveries, inventories and new orders over the previous month.

The headline reading for the PMI for the month of May was 52.5 – exactly the same as it was in April. A reading above 50 indicates expansion of the sector and below 50 shows a contraction. Although appearing to hold steady, the figure was actually slightly better than had been anticipated by industry analysts who had forecast 52.0.

Key takeaways from this month’s data:

Industry analysts have highlighted a number of areas from the May PMI as being particularly noteworthy:

Some firms indicated that good weather conditions during May led to improved construction activity, allowing for a catch-up following very poor weather at the beginning of the year. However, this could reflect a one-off rebound from the negative growth caused by the ‘Beast from the East’ in the first quarter, meaning that the same positivity might not be sustained as we progress further into 2018. The Guardian online also cited retail store closures as having a negative affect with some retailers choosing to avoid expansion and putting off the construction of new stores.

Residential house building remained the healthiest sub sector, but commercial and civil engineering were less robust. These areas have the potential to be more directly affected by general economic and political concern – particularly around Brexit. This atmosphere of uncertainty was further reflected in the fact that new orders declined in May for the fourth time in 5 months. The situation was further exacerbated by an increase in some important business costs which have a particular impact on the construction industry including steel and plastic, as well as rising fuel costs.

Job creation also experienced a four month low during the May survey period. BUT respondents reported that they are still facing a shortage of skilled construction professionals.

What does this mean for the industry as a whole?

The latest PMI data has produced a lukewarm and slightly mixed response from economic and business commentators. The CIPS described it as ‘subdued’ in its commentary, whereas investing.com saw the industry as ‘holding steady’. However, there can be no doubt that a climate of general political uncertainty has affected confidence which inevitably has a knock-on effect on willingness to plan and undertake major construction projects. This is despite the fact that there is undoubtedly a requirement and appetite for major infrastructure improvements throughout the UK.

 Our verdict: Skilled workers remain in demand

Watch this space. A mixed picture this month means it is difficult to predict or define a pattern at the moment. One thing that is true is that firms continue to have a high demand for skilled workers and that reflects our experience here at RedRock where we make it our priority to place the most skilled workers with the best opportunities provided by our clients.

Find out more about how we support our clients’ construction industry requirements or get in touch.