Monday, 18 May 2015

UK Construction Market Update - April

The Construction Products Association have released their latest State of Trade Survey for Q1 2015. The survey indicates an 8th consecutive quarter of increasing sales for construction product manufacturers, with further growth anticipated for Q2 and further into 2015. This anticipated growth is supported by domestic demand, exports and a reduction in fuel and energy costs.

RIBA have released their Future Trends Survey for March 2015. The survey shows that architects are becoming increasingly confident about their workloads, as the Workload Index Barometer raised from +26 in February 2015 to +36 in March 2015. Practises in London and the south of England are most confident about their medium term workloads. Private housing was the most positive area of work for the index, with Commercial sector confidence also rising. Public sector work was the poorest performer, although confidence rose between February and March in this sector.

RICS have published their latest Futures Report, exploring the implications of key drivers for change to 2030. To accompany this report they have released RICS Futures: Our Changing World, which is a short video capturing all the drivers and trends from their report. The CPA have also published a short video giving an introduction to the construction industry, explaining the importance of construction to government and the key issues facing the construction sector.

Although there is rising confidence and increasing sales in the construction sector, the Markit/CIPS UK Construction PMI shows construction output growth slowing in April 2015 and reaching a 22 month low. The index registered at 54.2 for April 2015, down from 57.8 in March, dropping for the 2nd month running. It is now the lowest it has been for almost 2 years. It is suggested that uncertainty related to the general election has contributed to delays in clients’ spending decisions, which in turn has contributed to the slowing in growth.

UK Construction PMI - April: 54.2
The ONS also report a decrease in construction output for Q1 2015, a decrease of 1.1% compared with quarter 4 (Oct to Dec) 2014. Between quarter 1 (Jan to Mar) 2015 and quarter 1 (Jan to Mar) 2014, output was estimated to have decreased by 0.3%. This is the first year-on-year fall since quarter 2 (Apr to June) 2013. Although the ONS also report following falls in January and February 2015, output in the construction industry was estimated to have increased by 3.9% in March 2015.

In-line with the slowing in growth reported by the UK Construction PMI and the ONS the Glenigan Index for May 2015 has fallen by 11% year-on-year, which is the largest fall since Q1 2013. This fall again is attributed in part to too many private sector clients and developers adopting a ‘wait-and-see’ attitude around the general election and how this will affect them and their business.

The installation of a majority government by the Conservative party should help quell this uncertainty. Cameron is finalising his cabinet with new faces being Greg Clarke as new Communities Secretary, Mark Francois as new housing and planning minister and John Whittingdale as new Culture Secretary. And Amber Rudd steps up to secretary of state for energy and climate change. A full list of cabinet members can be found here.

The Nationwide House Price Index reports that in April 2015 house prices increased by 1.0%, with annual house price growth up 5.2% in April 2015, from 5.1% in March 2015. The Halifax House Price Index reports that in April 2015 house prices increased by 1.6%, with house prices in the latest three months (February-April) 2.2% higher than in the preceding three months.

The ONS have released the Index of Private Housing Rental Prices for January to March 2015. The Index reports that private rental prices paid in Great Britain rose by 2.1% overall in the 12 months to March 2015, with growth of 2.1% in England and Scotland, but only 0.8% in Wales. Also rental prices showed the highest increase in London with growth of 3.2%.

New house building figures for Q1 2015 from the NHBC show more than 40,000 new homes were registered in the UK during the first three months of the year, an increase of 18% on the same period last year.

This continued buoyancy in the housing sector is reflected by the Miller group announcement, showing strong financial results for the year to 31st December 2014. The results show that after selling its construction division to focus on housing, they have tripled their pre-tax profits for the year from £10.4m in 2013 up to £34.6m in 2014, in the process making Miller Homes the group’s biggest revenue generator.

Source: Competitive Advantage Consultancy Ltd