RedRock Construction Industry Outlook – September 2018

Is the uncertainty around Brexit causing a slowdown following the summer’s positive news?

The picture for the construction industry as we head into the Autumn:

As we move into September, there is a slight chill in the air and the sunny and balmy days of the summer are coming to a close. People in the UK are famous for being obsessed with the weather but it has been a notable feature this year – particularly for activity in the construction industry which is affected by weather extremes. In 2018 we have experienced both the Beast from the East’s extremely cold and snowy conditions in the New Year, followed by an unusually hot summer – both of which have had a direct impact on the industry.

Last month we looked in detail at the Office for National Statistics’ (ONS) quarterly construction output data which showed a positive picture for the UK construction industry as a whole.

Hello September - word abstract in vintage letterpress wood type blocks against grunge wooden background with a fall decoration

We also like to keep an eye on the Monthly IHS Markit/CIPS Construction Purchasing Managers Index. This index had also reached a two year high last month. However there is a less positive figure from the most recent CIPS report with figures for August showing a slight downturn.

Last month’s index was at a high of 55.8, dropping to 52.9 this month – lower than the 54.9 which had been forecasted. Our regular readers will know that a reading above 50 indicates an expansion of the sector, and below 50 a contraction. So, despite a drop, there was still an indication of growth in the industry across the month.

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How did the individual sectors fare?

Taking a look at the individual construction sectors, the best performer was commercial building, followed by the residential sector. Work on civil engineering projects decreased for the first time in 5 months.

Generally speaking respondents reported that they expected to see expanded activity over the next 12 months but confidence has become weaker as we have progressed through the summer. It is likely that the earlier summer months did benefit from a strong bounce-back following the negative effects of the very poor weather at the start of the year.

There is also continued domestic political uncertainty in the UK as a whole and in particular the unresolved future status of the UK following Brexit remains an ongoing constraint on activity. This was anecdotally mentioned as a reason to limit investment.

What is the state of construction employment?

IHS Markit/CIPS reported that despite lukewarm August figures for the industry as a whole, hiring in the sector remained strong, but there continues to be a skills shortage within the higher skilled construction roles.

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Our verdict 

It is never great to see construction activity dropping. However it is important to remember that these figures do still represent a modest overall rise in construction output and we are comparing them to last month – which was a two month high.

This month’s survey did report that employment growth was strong and remained close to July’s record level and the main issue faced by industry respondents continued to be a lack of skilled labour in certain areas. If there is a positive to this – it is that employers are prepared to pay increased wages for those with the right skills. This creates a candidate led market for those professionals with the rights skills, training and accreditations such as carpenters, electricians and plumbers.

If you are looking for skilled personnel – or the next step in your construction career – RedRock can help. Get in touch with us today.