RedRock Construction Industry Outlook – May 2019

Taking a look back at the first quarter of the year

Positive news on house building but other sectors remain subdued

Unbelievably we find ourselves in May and heading towards the summer and the midpoint of the year. With the many political upheavals during the early months of 2019, it has been difficult to paint a really clear picture of how the construction industry is faring this year. So, as our regular readers will remember, every now and again we like to take stock and look back over a quarter or more for a longer-term view.

May has seen the publication of the official Office for National Statistics Construction Output figures which cover UK construction industry activity during the first quarter of 2019.

So – what have we learned from the latest ONS update? The figures for new work reflect the somewhat lacklustre picture that we have seen in our monthly blogs during the first quarter of the year with 0% growth over these three months.

Industry output increases over the quarter

On balance though, overall industry output did increase by 1% over the quarter and this figure was driven by repair and maintenance work which increased by 2.9% (including both private housing repair and maintenance and non housing repair and maintenance). Q1 2019 fared better than the last quarter of 2018, yet the ONS commentary did state that it is difficult to reach a conclusion on a month by month basis at the moment as the figures have been so volatile.

So how good is this good news? Some industry commentators have suggested that rather than reflecting a real growth in the amount of work – the increased activity may actually reflect some companies trying to complete projects before the original Brexit date of 29th March. This means that it is probably the bleaker lack of growth in new work which is the real story of the quarter. Uncertainty over Brexit continues to cast a pall over the industry and with a delay in place which may endure into the Autumn, this situation is unlikely to improve in the very near future.

Positive news for quarterly output

Meanwhile there was slightly better news in the latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index this month which tipped back into positive territory at 50.5. A figure of anything above 50 is positive and indicates growth (however small) plus this month’s output was slightly above the 50.3 that had been forecast by industry analysts.

The positive news came from a pickup in housebuilding. Both the commercial and civil engineering sectors remained subdued in the current climate of political uncertainty.

 

National House Building Council update

This positive news for house building was echoed by the NHBC (National House Building Council) which carried out its own analysis of new homes being registered in the first quarter of the year.

The number of new UK homes registered was 37500 which represented a 3% increase on the same period in 2018.

Construction skills shortage managed by a brickie visa?

It is important to remember that these figures are being compared to ‘beast from the east’ period last year which saw a reduction in construction activity due to extremely bad weather. The figures showed a decrease in private housing of 6% but this was offset by a 36% increase in the affordable and rental sector.

The NHBC commented that despite a general Brexit effect dampening the construction industry and consumer confidence, housing is still an ‘attractive asset class’ and this is why building continues to go ahead. London saw a notable 58% increase on the same time last year. This was partially due to a number of large housing schemes being registered at the beginning of 2019.

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