RedRock Construction Industry Outlook – November

‘Sustained decline’ is the continuing picture this month, although the construction output index figure is up from October

Contractors battle for projects with low pricing

Another month/another set of construction industry output figures, and it will be no surprise to any of our readers that there are few reasons to feel particularly optimistic as we head towards the end of 2019.

Looking towards the General Election in December

The most recent update from IHS Markit/CIPS shows a fall in UK construction output for the sixth successive month.

If there was any good news to be found in the latest figures, it was that the index figure of 44.2 was up from the previous month’s 43.3, meaning that the rate of fall was slower than had been seen in previous months. Also, despite a drop in new orders for the seventh month in a row, the actual rate of decline was at its lowest since July.

However, the accompanying commentary described the situation as a ‘sustained decline’ which is hardly a surprise following another month of UK political limbo in the UK. The latest Brexit deadline of 31st October has passed, once again, without the country leaving the EU. This has prolonged a mood of uncertainty in all areas of the economy, including construction.

Workforce numbers

Another worrying takeaway from this month’s output commentary was that construction firms are continuing to reduce their workforce numbers because projects are not getting started. Earlier in the year, there had been indications that some firms had been holding on to valuable personnel, in the hope that the situation would improve. Clearly this is a situation which cannot be sustained indefinitely.

A damp October also affects activity

Survey respondents also cited the extremely wet weather in October as having had a (literally) dampening effect on activity.

We have seen in the past how inclement weather can have a major impact on activity so it is particularly unwelcome at an already challenging time.

Rain, rain, go away!

Increased competition

It was also noted that the current feeling of uncertainty and consequent lack of new projects had led to increased competition across the sector as well as price discounting in order to secure any attractive contracts.

This was referred to in a recent article from the Construction Index as ‘suicide bidding’ meaning that contractors have been prepared to take on work which could ultimately see little or sometimes no profit in order to keep active. Building.co.uk referred to ‘panicked’ firms using ‘cut throat bidding’ in an effort to stockpile contracts.

Stagnant Civil Engineering

Civil engineering saw the fastest pace of decline in this month’s figures, echoing wider concerns about the status of a number of the UK’s highest profile infrastructure projects.

As highlighted in an article in the Guardian online, the current political impasse over Brexit means that these major infrastructure projects are simply not a focus for the government in the current environment.

As we have mentioned in previous blogs, the major HS2 project is on hold and under review, and there is ongoing uncertainty over other major projects like the third runway at Heathrow.

The forthcoming  UK General Election on 12th December means that no new decisions will be made until the elected government is firmly in place.

The status of the UK’s exit from the EU (currently) scheduled for 31st of January is similarly precarious.

This date, the manner of departure, and indeed whether it happens at all are highly dependent on the make-up of the new government, which will be formed this year but is unlikely to be getting down to any very serious business until 2020.

Which party will be running the country after 12th December?

Commercial property

In another survey recently published by RICS there are signs of unease in the Commercial property sector. If you remember, we looked at the latest update from RICS last month in relation to the residential housing market.

It is helpful to keep an eye on the property market in the UK as this is directly linked to stimulus to build more housing and commercial buildings.

This latest report showed the highest number of respondents who felt that the commercial property market is in a downturn phase. This was despite the fact that the underlying view is that capital value expectations remain positive over the longer term. Another indication that the economy is basically waiting for a clearer idea of the future across all sectors.

Anecdotal evidence implies that the Brexit situation has had a similar impact on commercial property, with general hesitancy leading to ongoing caution and an unwillingness to commit to big projects which involve major expenditure. The commercial sector is similar to the civil engineering sector in that major investment is required before projects can progress.

Our view

‘All eyes’ are currently on the December general election – with the fervent hope that the emerging new administration will be able to provide a clear future direction. Along with most industry players, we continue to watch this space to find out what happens next.

If you are looking for a new role in construction, or are planning a project and hoping to hire in the near future – we can help.

Get in touch with us today or register online. We look forward to hearing from you.

RedRock Construction Industry Outlook – October

No sign of a major upturn for the industry this October

The unresolved Brexit situation prolongs feelings of uncertainty in the sector

The headline of the latest IHS Markit/CIPS UK Construction Output survey figures is the somewhat alarming:

‘Activity declines at second sharpest rate since 2009’.

Although this is a monthly update, it comes at the end of the third quarter so it is always interesting to take stock at these key points in the year.

The index figure of 43.3 was markedly down on last month’s 45.0 figure (anything below 50 indicates contraction in the industry) and was below the 45.0 level that had also been anticipated by analysts.

Of the three individual sectors, commercial activity performed the worst, civil engineering had also dropped sharply and residential building registered a decrease in activity for the fourth month running.

Builder On Building Site Discussing Work With Apprentice

Feedback from survey respondents cited Brexit and general economic uncertainty as the main reasons why major projects weren’t going ahead. This is the consistent message that has been coming from industry participants over the last few months.

More positivity for the future?

On a more positive note, although respondents reported that business confidence was generally weak there was mild optimism that the picture would improve over the next 12 months, presumably with the hope that the Brexit stalemate will be resolved (although how this will happen is not yet clear).

However, this month respondents also reported a drop in staffing levels – the strongest fall in numbers since 2010.

Update from the Construction Products Association

In another recent update the Construction Products Association (CPA) has downgraded its industry predictions for the next 12 months. The CPA acts as the voice and campaigner for construction product manufacturers and distributors across the industry.

Construction skills shortage managed by a brickie visa?

In the summer the organisation had been predicting 2020 and 2021 growth across the industry of 1% and 1.4% respectively. This has now been adjusted down to 0.5% and 0.9%.

Three factors were cited; the possible impact of the government’s recently announced review of the major HS2 project (which may result in delay, downgrade or even cancellation), cost overruns at Hinkley Point C and uncertainty over the UK’s departure from the EU.

These aspects, and particularly the Brexit situation, have led to a lack of investment in new infrastructure, office space and house building.

Concerns in the housing market

In its most recent residential survey for September, the Royal Institute of Chartered Surveyors (RICS) has said that the ‘Brexit impasse’ is preventing people from selling their homes with the market remaining ‘subdued’.

The September figures showed that nationwide sales had reduced and new instructions were slipping. Listings coming on to the market had fallen for the first time in 4 months.

Construction industry watchers keep a close eye on the housing market because an increase or decrease in demand for housing has a direct affect on the likelihood that new houses will need to be built.

Anecdotal feedback was that a combination of both economic and political uncertainty are making people hesitate before selling or buying and the ‘Brexit effect’ is more marked in the South East than regionally.

On a more positive note there was a general feeling that the situation would improve over the coming year. Clearly this is another sector that is hoping for a resolution to Brexit as soon as possible

Construction in the Queen’s Speech?

As reported on Building.co.uk the Queen’s speech was delivered on 14th October. The speech outlines the government’s plans for the coming term of parliament and although the nation is currently in a state of political uncertainty, it still provides a useful outline of current intentions.

Industry watchers had been hoping for a mention of the HS2 project (see the CPA section above) as the current government review has made its future seem uncertain, but it wasn’t included in the speech (although it was addressed in the 2017 speech and it did at least make a very small appearance in this year’s briefing notes).

Aerial view of Leeds City centre with main train station ready for stage two of the HS2 project

There was also no reference to any plans to address the nation’s housing shortage. It had been hoped that the government might be intending to continue to offer assistance to first time buyers to help the sector, which in turn would encourage house building projects to go ahead.

One area of interest that was covered was the government’s intention to introduce improved building safety standards and create a new building safety regulator. This plan has emerged as a direct response to the Grenfell tragedy.

The speech also echoed the chancellor’s earlier pledge to improve the nation’s infrastructure (see our September blog) in a National Infrastructure Strategy focused on digital, transport and energy infrastructure.

Our view

Times when the industry faces challenges are when the team at RedRock Recruitment thrives, because of our proven professional methodology and the quality of our personnel and high levels of customer service.

If you are looking for a new role in construction, or are planning a project and hoping to hire in the near future – we can help. Get in touch with us today or register online.


We will be delighted to help.

RedRock Construction Industry Outlook – September

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.

 

RedRock Construction Industry Outlook – August

A gloomy mood continues to hang over the industry

Hesitancy persists for many major construction projects and developments

The ongoing lack of resolution to the UK’s Brexit woes is increasing fear that the UK economy as a whole is becoming subdued.

So it is no surprise that our update for construction activity in August reflects the general lack of forward momentum which is paralysing a number of different UK industries.

RedRock Construction Industry Outlook - August

The latest Markit/CIPS Index figures have shown an overall fall in UK construction output for the third month in a row. Both civil engineering and commercial work continued to see a downturn and new orders experienced a notable drop which was attributed to a lack of action across the sector because of Brexit. House building also fell but not by as much as the shock result of last month.

The overall score for the index was 45.3 – better than last month but well off the 50.0 which indicates that the industry is holding steady (or expanding when above that level).

Commentary from Markit indicated that analysts are not anticipating an imminent turnaround, and that a downward trajectory is likely to continue.

The survey also noted that the situation may be exacerbated by the scheduled October VAT changes which will affect the cash flow that some construction firms have available to support new work.

Read our RedRock Construction Industry Outlook - August

Under current rules suppliers are required to account for their own VAT but in a new effort to avoid fraud the government is requiring some firms to make the payment direct to HMRC.

Find out more on the UK Gov website.

Further downbeat news from the UK’s mineral producers

Meanwhile another survey issued in August also points to a creeping slowdown across the industry.

The Mineral Products Association has recently published its own data for the first half of 2019 for the aggregates market; crushed rock, sand, gravel, asphalt and ready-mixed concrete (RMC).

Our views in our RedRock Construction Industry Outlook - August
These raw materials are used by the construction industry across all sectors, so increases or decreases in demand provide a good guide to the level of activity across the board.

Sales volumes of aggregates in the first half of 2019 were 1.9% lower than the same period last year, indicating a reduction in demand for these materials. As the MPA points out – these heavy materials tend to be used in the early stages of construction projects so decreased demand indicates that projects are not getting started.

Only mortar sales, which are more closely linked to house building, saw a rise at 1.4% higher in the first half of the year compared to the same period in 2018. As we have seen in our blogs this year, house building has been the one sector that has bucked the downward trend when compared to the civil engineering and commercial sectors, although this has not been the case over the last two months.

Find out the latest in the RedRock Construction Industry Outlook - August

How are construction firms feeling?

The Guardian has looked at a series of different industry sectors in the UK to see how a possible recession plus the Brexit effect are impacting on day to day commercial activity.

In the construction sector they spoke to a building firm in Sutton in South London which carries out renovations and loft conversions and has 6 office staff and 25 onsite contractors. The article is well worth a read for an on-the-ground perspective. 

How is the industry faring this month? Find out in the RedRock Construction Industry Outlook - August

This company is looking to diversify its activities in order to weather a possible recession but one of their most pressing issues is the uncertainty about European workers’ future status following Brexit. This has led to many of their Eastern European workers returning home – particularly to Poland where the economy is relatively strong.

The lack of clarity over the future status of European construction professionals who want to work in the UK continues to be a problem for the industry which may find it increasingly difficult to recruit skilled workers for a range of construction requirements.

Looking for work or planning to hire quality construction workers?

RedRock Construction can help!

Get in touch with us or REGISTER ONLINE today.

RedRock Construction Industry Outlook – July 2019

Negative news overshadows the industry in July

The risk averse sector is too nervous to move ahead with major projects

A general slowdown in the UK economy and the ongoing lack of resolution over the nation’s Brexit situation has led to the worst drop in construction output seen by the industry in a decade.

As regular readers will know, general sentiment over recent months has been far from positive with lots of companies taking a ‘wait and see’ attitude to projects – particularly major expensive ones.

Many commentators have been on tenterhooks for a while, wondering when those feelings of ‘uncertainty’ might tip over into ‘negativity’. This is the month where that seems to have finally happened.

The July IHS Markit/CIPS Construction Purchasing Managers Index belly flopped to 43.1- considerably below the 49.3 figure that had been predicted by analysts and providing a stark reminder of the profound uneasiness of the sector in our current Brexit limbo.

As we have discussed before, a figure below 50 shows a contraction in the industry and not only was this month’s figure well below that, but it was also at the lowest level that had been seen since April 2009 and the depths of the financial crisis.

Respondents reported that clients were unsure about proceeding with major projects which is hardly a surprise under current circumstances. The drop was experienced in both business activity and reports of new work.

In previous months the commercial and civil engineering sectors had been most affected but this month the gloom has also spread to housebuilding with negative figures reported across the whole industry.

Activity in housebuilding saw a drop for the first time in over a year and it was the largest drop in activity for three years. Commercial work remained the weakest area overall, with a fall for the sixth consecutive month.

 

According to an article in the Guardian the combination of no clear way forward and the growing possibilities of either a Labour victory in a snap autumn general election or a no deal Brexit was keeping major infrastructure projects on hold.

More positive news on staff retention

The demand for construction staff remained stable which is good news. This may reflect the industry’s hope that this period is a blip and we can look forward to more certainty soon. Although business optimism is subdued respondents did report that they are holding on to their staff whilst looking forward to things improving. Few layoffs were reported with companies not replacing workers who had left, but retaining the skilled people already in place.

Will the new Prime Minister make a difference?

Will our new PM, Boris Johnson be able to really make a difference to sentiment across the sector? The reality is that we can’t yet be sure. He has indicated his intention for the country to leave the EU on 31st October so this can raise the stakes on a no deal Brexit but at the same time he is committed to getting an agreeable deal into place with the EU. It is also a case of ‘wait and see’ for some UK infrastructure projects from the new PM who has taken an equivocal stance on both HS2 and Heathrow expansion during his campaign.

 

Hopefully things will be clearer soon – but for the time being at least, the uncertainty is likely to remain.

Need more information?

If you are recruiting specialist construction personnel or are looking for your next role – get in touch with us.

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RedRock Construction Industry Outlook – June 2019

This month sees a setback for the sector

The positive news from last month is overshadowed by increased uncertainty in June

If we could travel back in time to the beginning of the year and ask people how they thought 2019 would pan out from an economic and political perspective, it is unlikely that many would have predicted that come June, the UK would still be in the EU, that the country would have recently held its European Parliamentary elections, and that we would be in the midst of the competition to find a new Prime Minister.

However, ‘here we are’ and the political uncertainty which has remained a major theme so far in 2019 is still with us. Inevitably this continues to have an impact on lots of commercial activity throughout the UK – and not least on the construction industry.

An article in the Guardian on the 4th June highlights the ‘mothballing’ of major commercial and civil engineering projects as Brexit uncertainty hangs over the UK construction sector.

The article reflects the sentiment from the most recent IHS Markit/CIPS UK Construction Purchasing Managers’ Index which has shown that of the three major sectors – house building, commercial projects and civil engineering – only house building saw an expansion in activity last month.

This was not enough to make up for the slowdown in both the commercial building and civil engineering sectors, the former being the weakest with the greatest fall since the Autumn of 2017 and the latter seeing 4 consecutive monthly falls in activity.

Feedback indicates a contraction in June

The index figure for this month was 48.6 which means a contraction in the industry overall, and it was also below the forecast of 50.5.

If you remember from our last blog, there had been a small rally for the industry in May, with the figure just tipping into positive territory at 50.5. Accompanying commentary for the most recent figures points to the fact that both output and new orders declined this month at the highest rate since the first quarter of 2018. The reason? Our old friend ‘uncertainty’ was seen as responsible, leading to delayed decision making over expenditure on major new projects.

RedRock Construction Outlook November

As nobody is entirely sure what happens next with Brexit or who the new Prime Minister will be and what his manifesto will be, this is hardly a surprise.

With no solution on the horizon it is likely that this situation will persist. Major construction projects take a long time to ramp up even in the best of circumstances, so it is likely to be a while before the sector gets up to speed again.

The outlook for construction workers

Respondents to the survey also said that in some cases they were starting to take a more cautious approach with their recruitment strategies and weren’t moving quite so quickly to replace staff who had left. This resulted in the sharpest drop in employment in the sector for more than six years.

It has already been acknowledged that Brexit (even when it happens) has the potential to have a direct affect on the supply of skilled labour.

In an article in February the Institute of Civil Engineers (ICE) estimated that the UK construction industry needs 124000 new engineers and technicians every year.

Inevitably some of these people would normally come from the EU so the ongoing uncertainty over future arrangements really does cause problems for skilled people who want to work here and for large firms who want to hire.

Our view

As the absolute experts in construction recruitment – RedRock Recruitment are excellently placed to continue to find the right roles for in-demand people and the right skilled staff for our clients.

Get in touch today or submit your CV online. We look forward to hearing from you.

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.

Our view

We support our clients to find the best skilled workers and capable professionals to find the right positions and we continue to see a high demand for this service. Please get in touch with us if you are looking for new staff, or register your CV today.

RedRock Construction Industry Outlook – April 2019

A continued contraction in construction output causes concern

This month sees little improvement in industry confidence with no resolution over Brexit on the horizon.

Despite an uncertain start for the industry in 2019, we have recently heard positive news of a major new construction project for the City of London. Plans for an innovative new skyscraper have recently been approved by the City of London Corporation.

The building which is nicknamed ‘The Tulip’ because of its distinctive bulb like form, has been designed by Foster & Partners. The size and shape of the building has proved controversial – when complete it will be 305m high, making it the second highest building in Western Europe after its South London neighbour, The Shard.

RedRock Construction Industry Update April 2019

Despite ongoing fears of a slowdown in the construction industry, thanks in large part to Brexit uncertainty, there are a number of iconic projects already in the pipeline for the London skyline which are either moving ahead or waiting approval for the near future. Despite some mixed news related to the London housing market, the go ahead for The Tulip is a thumbs up for a major commercial project in the capital.

The weather effect

As we know from our ongoing analysis of trends in the UK construction industry, the weather can have a major impact on the health of the sector.

Poor weather is likely to affect both sentiment and physical construction activity. Unfortunately, our brief spell of early Spring good weather was not enough to boost the industry construction figures into positive territory.

Construction Industry Outlook April 2019

Recent figures have shown a second month of contraction in the UK construction industry following the run of relatively positive output figures that we saw in 2018 (with the exception  of the ‘Beast from the East’ blip at the start of the year – that weather affect again!).

This month’s IHS Markit/CIPS UK Construction Output survey put the index at 49.7. This was at least marginally better than the results reported for the previous month which we highlighted in our March blog.  However, at below 50, this indicates that the industry remains in contraction, for the second month in a row.

What was the picture for each of the industry sectors?

A small amount of growth in house building could not make up for the bad news from both the commercial and civil engineering sectors.  The worst area of the three was commercial construction which saw its greatest drop in activity since March of last year.

RedRock Construction Industry - what's happening in April

Commentary from IHS Markit/CIPS UK described this as a ‘recent soft patch’. General business uncertainty had slightly improved following the very negative feelings early in the year, but was generally subdued compared to the norm and the survey recorded only a very small increase in new business and employment figures over all.

Political uncertainty was once again cited as contributing to a lack of confidence and ‘indecisiveness’ is the current state of play on a number of major projects. Confidence in the industry as a whole and the UK economy in general is vitally important to ensure that planned multi million pound commercial and civil engineering projects continue to move ahead.

Our view

In common with most industries in the UK – a decisive plan for the way forward on Brexit (when that comes!) will certainly help to boost confidence.

As many projects are a long time in the planning stages – the industry remains busy with demand for quality workers continuing to be the case.

If you are a client looking for quality personnel, call us today and if you are a construction professional looking for the next step in your construction career – register online for the very best opportunities.

RedRock Construction Industry Outlook – March 2019

March sees the first contraction in construction output since the poor weather in early 2018 

General uncertainty over the status of Brexit casts a pall over construction activity

There is no getting away from it, and as much as many of us would like to avoid any further debate on the subject, something we have to address in this month’s outlook is Brexit.

Looking back over previous editions of our monthly outlooks, this major forthcoming (we think!) change to our international relations has cropped up on a number of occasions. This month really sees it front and centre.

The dangers of uncertainty

Many industries and individual businesses are wrestling with the major  uncertainty that the ongoing political deliberations are causing. When we wrote about Brexit in our round-up of the year at the end of 2018, little did we think that in the latter half of March, we would still be wondering what will happen next.

Whether Soft Brexit, Hard Brexit, No Deal Brexit or Delayed Brexit – the lack of a single clear direction is inevitably causing a crisis of confidence in lots of different areas of business.

The construction industry is particularly vulnerable

The construction industry has always had the potential to be particularly affected by Brexit. Important relevant factors include huge projects which either move ahead or are delayed as a result of general business confidence, cross-Europe construction co-operation, the confidence of consumers (and therefore house buyers), the value of the pound and the movement of workers across Europe.

Is it any wonder that projects have been delayed whilst everyone waits to find out what the next steps will be?

Contraction in the industry

Turning to the important construction industry output figures for this month published in the IHS Markit/CIPS UK Construction Output survey, the latest index has shown a contraction in the UK construction industry for the first time following a period of 10 straight months of expansion.

The most recent output figure was at 49.5, and as we have indicated in past blogs – anything above 50, even a very small amount, indicates an expansion – below means that the industry is contracting. According to the survey the only construction category to see any growth was housing and this was described as modest. There were drops in both commercial building and civil engineering.

Feedback from industry respondents

Anecdotal feedback from respondents highlighted Brexit as the major factor affecting confidence in the industry. The view was that general political uncertainty is leading to a drop in invitations to tender.

Employment

Employment figures were not as robust as those seen at the end of 2018 but the good news is that employment creation has held steady and didn’t see any actual drop. Some companies reported that they are continuing to train staff in order to offset perceived skills shortages but at the same time the general outlook had caused some firms not to replace leavers.

The housing market

Despite the modestly positive figures for house building, there was some additional less than encouraging news in the latest RICS (The Royal Institute of Chartered Surveyors) Residential Market Survey for February 2019.

The overall results showed a decline in activity throughout the UK housing market for new buyer enquiries, instructions and agreed sales. 77% of respondents indicated that Brexit uncertainty was holding back sales activity.

The reality is that if people are not buying houses then this will apply an inevitable brake on them being built. Residential house building has traditionally been the sector that has held-up the best for the industry, when negative sentiment has affected other sorts of construction activity.

Our view

Construction activity remains busy and we are constantly on the lookout for skilled workers for our clients. At the same time we are looking forward to the resolution of the current Brexit stalemate – which we hope comes soon – and a welcome return to optimism for the UK Construction Industry.

Find out more about RedRock Recruitment – or get in touch with us if you need more information about any of our services.

RedRock Construction Industry Outlook – February 2019

A change in optimism from the end of last year

Residential house building remains the best performing sector in the latest lacklustre update on construction industry activity 

For those who regularly read our construction industry blogs, there can be no doubt that 2018 was a year of ups and downs. Most industry players and stakeholders from the wider economy have probably had their fingers crossed in the hope that 2019 might shape up to be a more consistent year.  Unfortunately, February’s construction output figures do not seem to be giving that impression.

The latest IHS Markit/CIPS UK Construction Output survey published on 4th February has shown output figures to be at a low not seen for nearly a year, in contrast to the tentative optimism that we saw in last month’s data.

The PMI index had a score of just 50.6, down from the 52.8 recorded in the previous month, indicating a marked drop in activity from the previous month. Another cause for concern was that the index was below forecast expectations of 52.6.

The Guardian Newspaper cited this as a ‘significant slow-down’ in growth, and the commentary accompanying the survey from IHS Markit/CIPS pointed towards a ‘loss of momentum’. This is probably not what most stakeholders in the industry want to hear.

New business confidence and prospects for employment

New business levels also experienced an eight month low. Respondents reported that many clients were taking a ‘wait and see’ approach to major projects which in turn was having a direct affect on employment with some projects being delayed. The feedback from respondents indicated the slowest expansion of construction employment figures for two and a half years.

The individual sectors

All three of the major construction sectors; Commercial, Civil engineering and Residential, saw weaker growth than last month.

Residential work was the strongest of the three (despite being described by the IHS Markit/CIPS commentary as ‘modest’).

Civil engineering saw a minor increase and Commercial construction was the worst performing area with a decline in commercial projects (for the first time in 10 months). This sector is most likely to be affected by a general lack of confidence in the British economy and the geopolitical environment, which still persists whilst the country awaits the outcome of the Brexit negotiations.

Residential new builds remained the strongest sector

There is no doubt that the UK needs more housing so it is positive that this sector continued to see growth, albeit less robustly than recently. The government’s Help to Buy scheme has supported the number of home purchasers in the market which in turn is likely to have had a positive impact on residential building projects going ahead.

What can we conclude?

The index is above 50 so the industry is still (just) expanding rather than contracting. The figure has remained above 50 since the major weather problems experienced in early 2018 but this is the lowest level since then.

More positively, although the construction survey respondents were feeling less optimistic than at the end of last year, the majority still reported that they expect to see output to continue to rise as the year progresses. Inevitably, uncertainty over Brexit and the ongoing fears that there may be a hard Brexit were the most commonly cited reason for projects awaiting final approval. Until this issue is resolved and the construction industry has a clear idea of the way forward, the uncertainty is likely to remain.

Looking back on last year, we know that individual ups and downs are not necessarily indicative of a consistent downwards trend. We continue to remain busy and will monitor developments in the industry closely over the coming months.

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