RedRock Construction Industry Outlook – July 2018

This month sees a welcome improvement in outlook for the UK construction industry.

Good weather and the football feel-good factor have accompanied a modest recent improvement across the UK economy as a whole

It isn’t just the football that has made us all feel more positive recently. According to the most recent Office of National Statistics (ONS) analysis (issued on 10th July 2018) there was a small growth of 0.3% in the UK economy during May, thanks in part to a combination of the warm weather and the royal wedding.

No doubt the success of the England team in the Football World Cup also encouraged a feeling of optimism for many of us over the last month or so with the nation’s retailers benefiting from sales of beer and barbecue ingredients! Although the figure only reflects a small improvement, the picture does look better than during the terrible weather at the beginning of the year. So, does this positivity also apply to the construction industry?

leisure, food, people and holidays concept - man cooking meat on barbecue grill for his friends at summer outdoor party

How did the construction industry fare in June?

The ONS report pointed to a growth of 2.9% in the construction industry in their report following no growth in April and a contraction earlier in the year. There was also slightly better news for the industry coming from the  HS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) data for June. The survey saw increasing improvement during the month with the Index increasing to 53.1 from May’s level of 52.5. As a general rule a figure above 50 indicates growth in the industry and below means contraction. This was also slightly above analysts’ expectations – which had been 52.5.

A contraction near the start of the year had been blamed on the extremely poor weather during the winter months and this increase may well indicate that this earlier analysis was correct.

Why are things looking up?

According the the index, house building was the strongest sector in the construction industry during the month of June. The monthly Halifax survey (reported in the Guardian)  which looked at the housing market in the same period revealed that prices had risen a very small amount for two months in a row. This was a very modest rise and house prices are still essentially flat – but any evidence of a consistent upturn is likely to prove positive for the house building sector in coming months.

Building Site With House Under Construction

However, the Index did also see a general expansion in all construction areas with signs that commercial building is beginning to increase again after flatter activity in early 2018. New orders are up leading to an increased workload across the sector.

There was a downside which was an increase in input costs throughout the industry.

What does this mean for employment in the construction sector?

Two factors from this month’s finding are particularly notable – new orders were at their highest level since mid 2017 and job creation was at its highest level since a year ago. Both of these factors also led to an increase in the purchase of raw materials across the industry.

Our verdict: A general improvement across the industry highlights the growing need for skilled professionals in all sectors

Although the survey indicates an improvement in sentiment – it is still early days to herald a complete rebound. Some uncertainty remains – with residential housing construction in the lead, commercial projects improving and civil engineering still needing to catch up.

We are, however, delighted to see an improvement in the job creation figures as this indicates a boost for the jobs market as a whole.

Are you looking for the next step in your construction career? Or are you looking to recruit quality construction professionals? Get in touch with RedRock today and we will be delighted to discuss your requirements.