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Sharp drop in output for ‘troubled’ construction industry

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Construction output fell by 3.4 per cent in the first quarter of 2018 – the sharpest drop since 2012 – according to figures from the Office for National Statistics (ONS)

The figures, based on bills to clients charged by businesses in the construction industry, were the sixth consecutive quarter-on-quarter decline.

In addition, the value of new orders of main contractors in Great Britain declined by 4.6 per cent compared to the final quarter of 2017.

Michael Thirkettle, chief executive of construction consulting and design agency McBains, said: ‘Today’s statistics prove the construction sector is still in troubled waters with continuing uncertainties, borne from Brexit, and the poor value of sterling impacting on the cost of imported materials, meaning many UK companies are delaying investment decisions.’

And he hinted that the worst for the sector might yet to be to come.

‘The real test, however, will be in the months to come, given the uncertainty over issues like Brexit that have impacted on UK companies’ commitment to new projects over the last two years,’ he said.

Federation of Master Builders chief executive Brian Berry said that the cold snap caused by the Beast from the East could also have been a factor in the output fall. ‘Indeed, builders were reporting that it was too cold to lay bricks,’ he said.

However, he also cited rising material prices due to the depreciation of sterling.

‘In the medium to longer term, with nine months until Brexit-Day, the future is uncertain for the UK construction sector,’ he said.

He called on the government to clarify proposed details of the post-Brexit immigration system, saying that more than 8 per cent of construction workers come from the EU.

The construction industry dashboard is now a sea of warning lights

The ONS figures show that the largest decline in output came in the infrastructure sector, which fell by £379 million.

Other notable falls in output came from housing repair and maintenance, and private housing new work, which fell by £230 million and £189 million respectively.

Blane Perrotton, managing director of the national property consultancy and surveyor Naismiths, said that the ‘construction industry dashboard is now a sea of warning lights’.

He added: ‘With the output from all sectors bar one now firmly in contraction territory, the fall in new orders suggests the slide is here to stay.’

The one bright spot was a slight month-on-month bounceback in April 2018, which saw output rise by 0.5 per cent.

However, Rebecca Larkin, senior economist at the Construction Products Association, said: ‘This seems like a false positive, as output remained weak compared with April last year.’

The construction figures echo findings from this year’s AJ100 survey of the UK’s largest practices.

The annual barometer of the health of the profession shows that, for the first time in four years, the total number of architects working for the country’s largest firms has dropped.

The 106 practices making up this year’s cohort collectively employed 6,782 ARB-registered or equivalent architects in the UK at the start of 2018, a dip from 6,853 in the previous year (also 106 practices). 

Comment

Mark Robinson, chief executive of Scape Group

The current uncertainty around Brexit is having a very real impact on the ground. Output was down 3.3 per cent in April on the same period last year, and although the weather may have had a short-term impact, the industry has struggled to regain momentum over the past twelve months.

’There’s less appetite for big projects in both the private and public sector’

There is less appetite for big projects in both the private and public sector and this should be a concern for the Government. Sadly, the Government’s failure to provide clarity on its Brexit policy is damaging both the construction industry and the wider economy.

The need for investment is clear, however, particularly in housing, infrastructure and the NHS, and there is an opportunity for the Government to push ahead with big projects to provide an economic boost that will support SMEs and supply chains in a time of relative uncertainty. If the Government could extend the right of local authorities to borrow to build council housing, this would provide a welcome boost to supply chains at a regional level.

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