Monday, 22 February 2016

UK Construction Market Update - January

The latest Construction Skills Network report from CITB predicts strong growth, as UK construction is expected to grow by 2.5% every year over the next 5 years. Leading this growth is the Welsh construction industry forecast to grow 7.1% each yearfor the next 5 years.

The ONS have released their Output in the Construction Industry December 2015 and Q4 2015 figures. Output increased by 1.5% in December 2015 compared to November 2015, due to new work increasing by 2.6% and being offset by a decrease of 0.5% in repair and maintenance. In Q4 2015 output was estimated to have decreased by 0.4% compared to Q3 2015, yet overall annual output for 2015 increased by 3.4% compared to the overall data for 2014.

The CPA’s latest State of the Trade Survey shows in Q4 2015 construction activity rose for the 11th consecutive quarter. This was led by new building activity in private housing, commercial and infrastructure.

The CPA have also released their winter 2016 construction forecasts, which estimates growth of 3.6% in 2016, a downward revision form their autumn forecast in 2015, due to slower UK economic growth. Despite this revision the forecasts remain largely positive. In 2017 output is set to rise 4.1% and an increase in private housing starts of 5.0% are forecast for both 2016 & 2017.

However the Markit/CIPS UK Construction PMI in January 2016 shows the weakest expansion of UK construction output for 9 months, as the index drops from 57.8 in December 2015 to 55.0 in January 2016. This fall has signalled the slowest rate of expansion since April 2015. Alongside this construction firms have reported the lowest business confidence looking forward since December 2014, this is due to underlying demand conditions starting to soften.

UK Construction PMI - January: 55.0
The Arch-Vision European Architectural Barometer reports British construction markets are improving, but its increase is not stable, due to a fluctuation in residential. Dutch construction markets have recovered at a faster rate than other European countries, whereas France is expected to start its recovery in 2017.

Glenigan’s monthly barometer of project starts reports a sharp decline in December 2015, as the value of starts during 2015 Q4 were down 14% on a year earlier. This was attributed to the extremely wet December. The number of starts during the first quarter of 2016 is also expected to be slow due to waterlogged sites and an evident lack of confidence among construction clients; however activity is expected to pick up later in the year led by the commercial and private housing sectors.

The ONS House Price Index reports that house prices increased by 6.7% in the year to December 2015, down from 7.7% in the year to November 2015. The Nationwide House Price Index reports that in January 2016 house prices increased by 0.3%, with annual house price growth remaining stable at 4.4%, down from 4.5% in December 2015. The Halifax House Price Index reports that in January 2016 house prices increased by 1.7%, and house prices in the last 3 months (November – January) were 2.2% higher than the preceding 3 months. Figures from NHBC reveal the number of new homes registered by NHBC to be built in the UK topped 156,000 in 2015 – an increase of 7% on the previous year. This as Bovis Homes has seen its full-year profit jump 20% in 2015 to £160.1m, up from £133.5m the previous year.

Source: Competitive Advantage Consultancy Ltd