Friday, 18 March 2016

UK Construction Market Update - February

With the Chancellor’s 2016 Budget Statement earlier this week, the government has identified Crossrail 2 as a ‘priority’ and is providing £80 million to develop the project. Government have also allocated £750 million for flood defences. Alongside this the HS3 rail link between Manchester and Leeds has been given the go ahead. Also the Chancellor announced that all schools are to become academies by 2022.

The ONS have released their Output in the Construction Industry January 2016 and new orders Q4 2015 figures. Output decreased by 0.2% in January compared to December 2015, with all new work decreasing by 0.8% and repair and maintenance increasing by 0.8%. New orders were estimated to have decreased by 0.5% in Quarter 4 2015 compared with Quarter 3 2015, and increased by 1.4% compared with Quarter 4 2014.

Commenting on the ONS figures, the CPA see the fall in construction output in January 2016 as disappointing, but largely reflects the poor weather experienced at the beginning of 2016. In contrast to this they expect this fall in output to be temporary and say that the ONS’s new orders data show that activity should increase significantly during 2016.

Barbour ABI have published their latest Economic & Construction Market Review March 2016. This report shows that construction levels increased in February 2015 with the value of new contracts awarded being £5.6bn. This value represents an increase of 4.2% from January 2016, and is an increase of 11.6% from the value recorded in February 2015.

Glenigan has published the first BuildUK State of Trade Survey, which shows contractor enquiries remained relatively flat throughout 2015, with output rising only slightly in the Q4 2015. This is leading contractors to expect workloads to grow over the coming year, nearing full capacity, despite difficulties in recruiting the right skills and the knock-on effect of labour costs causing concerns.

The Markit/CIPS UK Construction PMI shows construction output hitting a 10-month low in February 2016, led by the weakest rise in housing activity since June 2013. The index registered 54.2 in February 2016 which is a decrease from 55.0 in January and is the lowest since April 2015. This points to one of the weakest rises in construction output seen over the last 2 and a half years, with residential building the worst performing sub-category of construction output since January 2013.

UK Construction PMI - February: 54.2

The Nationwide House Price Index reports that in February 2016 house prices increased by 0.3%, with annual house price growth slightly accelerating to 4.8%, up from 4.4% in January 2016. The Halifax House Price Index reports that in February 2016 house prices decreased by 1.4%, and house prices in the last 3 months (December to February) were 3.0% higher than the preceding 3 months. They also report that annual house price growth remains unchanged at 9.7%.

Finally with the EU referendum being announced at the end of February, uncertainty has been created for how the industry will react, depending on whether Britain leaves or remains in the EU. The Building Centre has provided a round-up of the first reactions. Once the referendum has passed, Martin Hewes of Hewes Associates, will outline the possible impact on construction industry activity in a seminar for CIMCIG on 21st July 2016.

Source: Competitive Advantage Consultancy Ltd