Continuing evidence of a slowdown gives the construction industry pause for thought
Analysts express some concern over September figures
The picture this month
Industry analysts have shown some concern following a continued sign of construction slowdown in the monthly figures reported in the recent IHS Markit/CIPS UK Construction Purchasing Managers’ Index.
Overall construction business increased during the month but expansion slowed for the second month in a row. This month’s figures also showed the weakest signs of growth over the past 6 months.
The headline figure for this month’s index was 52.1, versus 52.9 for last month and the industry forecast had been set at 52.8. Any figure above 50 does indicate expansion – but what is worrying industry observers is the slowdown in growth and general lack of confidence and momentum in the market.
Looking at the individual construction sectors, house building and commercial construction continued to hold their own with an increase in both sectors. The rate of decline in Civil engineering was the most notable and the CIPS cited a lack of new work in this sector.
Good news for new orders
Despite the slight slowdown there was good news for new construction orders. The growth in new orders in was at its highest since December 2016 and this was particularly notable for new building in the residential sector which continues to see a growth in demand.
What is behind the figures?
Analysts have long cited Brexit as having the potential to cast a shadow over the construction industry but the direct impact continues to be difficult to measure. However, there is continued uncertainty hanging over the UK economy as a whole whilst business waits for a solid plan/agreement to emerge.
The EU Summit which will be held in Austria on 18-19 October is intended to decide on the final terms of Brexit but it is not yet clear what, if anything, will be agreed.
This month’s construction output survey did reveal a decrease in optimism amongst construction firms as a result of an overall lack of confidence. This is increasingly leading to potential project delays and there is a feeling of ‘putting off projects until things are clearer’. General feedback on confidence about the future was found to be at its second lowest level since February 2013.
What does this mean for construction industry employment?
Interestingly and in contrast to the decrease in general optimism, as a result of the upturn in orders – employment was at its highest since the end of 2015. Firms also reported taking on more apprentices and trainees.
With an ongoing skills shortage in the industry and the potential for this to worsen over the medium term with less automatic access to European workers, this could be a positive sign that firms are beginning to increase investment in training to ensure a supply of skilled labour into the future.
Another month – another slight dip and the picture seems to be really up and down since we have been following the trends this year. The one thing that can be concluded is that general uncertainty continues to cast a shadow over confidence. Although new orders have picked up – any confidence about the future is muted and this continues to be the case whilst we are awaiting the outcome of Brexit negotiations and is likely to remain until there is a clear indication of the way forward.
At RedRock we continue to remain busy and to see a demand for professionals for all construction sectors and particularly those who are high skilled trades such as plumbing, engineering and electricians.
If you are looking for a new role in any of these areas – get in touch with us to find out what is on offer today.