RedRock Construction Industry Outlook – September 2019

Hesitancy persists with major projects remaining on hold

Not much change for the industry in stagnant September?

Autumn is approaching

As we head into the Autumn is it possible to detect any hopeful signs of a change to the pessimistic mood which has haunted the construction sector during recent months?

The short answer is  ‘no’ as the broader listless political and economic status quo remains in the UK, with very few people willing to take a firm bet on the chances of the country exiting the EU on 31st October as planned.

Indeed the recent monthly construction output figures from IHS Markit/CIPS caused some alarm in the industry with the sharpest reduction in new work since March 2009 and a decline in business activity for the 4th month in a row.

The index was at 45 in August down very slightly from the 45.3 seen in the previous month. If there is any comfort in this month’s update, it is that there wasn’t a greater drop.

However this keeps the index figure at below 50 for the fourth consecutive month, indicating a contraction in activity.

Feedback from participants indicated poor order books and the general lack of new projects either moving forward or even on the horizon. All three construction categories (commercial, infrastructure and house building) decreased.

Commercial building saw the greatest negative impact, although a chink of positive light was that house building only saw a very slight downturn. Brexit uncertainty was once again cited as the reason for lack of confidence with his situation likely to persist until the way forward is clear.

Good news for employment?

Despite this, employment trends in this month’s update were relatively resilient.

It was noted that there was a marginal drop in staffing levels across the UK, but the reality seems to be that companies are holding onto their skilled staff with reductions being managed by non replacement of voluntary leavers.

In reality, rather than a true downturn, the industry is actually in limbo. Clearly large firms are holding on to skilled staff and hoping that once Brexit is resolved, things will improve with delayed projects starting to move forward.

Good news for infrastructure?

Also featured in the news in September was the new Chancellor, Sajid Javid’s spending review statement which he delivered earlier in the month.

Although much of the detail was drowned out by other political happenings the review did promise an ‘infrastructure revolution’ with a pledge to commit to major investment in the country’s infrastructure with a particular focus on transport and energy efficiency.

The plans were broadly welcomed by the National Infrastructure Commission with a note of caution that a true long term plan must be established to support infrastructure into the future.

It is exactly these sorts of major projects that are currently facing delays so increased activity in this area would be greatly welcomed by construction firms and provide a much needed boost to the industry.

For the time being though, we will wait and see how activity progresses.

How about house building?

One of the major construction sectors is house building so it is always helpful to keep an eye on house prices in the UK as they have a direct impact on demand for new housing.

The most recent survey from the Halifax published in August described house prices in the UK as ‘resilient’ with a 0.3% rise in prices – the second month in a row to see a rise.

In the commentary Halifax said that despite evidence of economic uncertainty having a negative effect on consumer sentiment, house affordability and levels of employment remain positive, so this is continuing to sustain the housing market.

Also, Barratt the UK’s biggest house builder has recently posted an 8.9% rise in pre tax profits to £910m – whilst also warning that 2019 sales are slower than had been expected.

Average selling price dropped and sales in the capital were flat but sales outside of London rose and the company sold a total of 17865 new homes up from 17579 in 2018. 40% of sales had been supported by the government’s ‘Help to Buy’ scheme which is designed to make the property market accessible to first time buyers.

Despite general gloomy sentiment it is positive to see that demand for new housing continues as this will inevitably support activity in this sector of the industry.

Our view

As experts in the construction industry we fully understand the current challenges, but at RedRock we continue to see demand for skilled and qualified construction workers for a range of different projects.

If you are looking for a new role, or are hoping to hire in the near future – get in touch with us today or register online. We will be delighted to help.