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Construction staves off January blues | Construction Buzz #208

14 Mar 2019
The latest figures from the ONS relevant to construction output have been released, showing that despite the many outside pressures and uncertainties plaguing UK businesses, the construction industry is continuing to grow, with all work up 2.8% in January.

Reversing a sharp decline from December, January’s figures help maintain the trend of steady growth seen since 2017, with the January all work series being 1.8% higher in 2019 than the same month a year earlier.

The three-month on three-month series for all work saw a decline of 0.6% in January 2019, due largely to weakness in December and October, with the growth seen in the monthly path still not being enough to recover from the declines then. January 2019 has the lowest growth recorded in the three-month on three-month series for all work since May 2018, with the falls driven losses of 2.3% in the all repair and maintenance series.

New orders fell by 1.9% in Quarter 4 (Oct to Dec) 2018 against the previous quarter, with all other work decreasing by 3.8%, more than offsetting the 2.3% growth in all new housing during the same period.

Both repair and maintenance, and new work have seen increases in January 2019, with growths of 6.3% and 0.9% respectively. This is the largest month-on-month increase in the repair and maintenance series since the monthly record began. Despite the increase however, the repair and maintenance series still sits at £32M below the record-high level for the series in September 2018.

In the new work series, infrastructure and public other new work led the growth, with 5.9% and 9.0% gains respectively. As with repair and maintenance, the growth in infrastructure follows three months of continuous, but minor, declines in the series. However this month’s strong growth sees infrastructure hit a new record-high level of £1,859M.

In contrast with the three-month on three-month series, non-housing repair and maintenance recorded the largest month-on-month growth, with an increase of £217M in January 2019.

Beyond non-housing repair and maintenance, public other new work and infrastructure saw increases of £75M and £104M respectively, representing the two largest month-on-month increases in new work. It should be noted that for the second consecutive quarter, a separate, large order for a wind farm dominates the new orders placed within infrastructure.

Commenting on the new construction output figures, Clive Docwra, Managing Director McBains, said: “The January figures are moderately encouraging, especially given the shadow of a no-deal Brexit looming large, which we expected to see reflected in a contraction – or at least a slowdown – in output.

“However, the real test of the resilience of the construction sector will be in the months to come. Many of our clients are telling us they are biding their time before they commit to investing in new projects until the whole Brexit situation becomes clearer, as evidenced by today’s statistics statistics showing a fall in new orders over the last quarter of 2018. The next few months could prove to be a crunch point for the industry.”

Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, commented: “Across much of the industry, the pipeline of new work has slowed to a trickle. The final months of 2018 saw the number of new orders slip from stagnation into reverse, meaning many builders now have skinnier order books than they have had in years.

“While January’s output figures put housebuilders into unfamiliar territory – as also-rans – the picture was brightened by better performance in public sector and infrastructure work.

“Nevertheless, confidence is brittle at best. Last week’s PMI data showed sentiment has plunged back into negative territory, and intense competition for the little work that is being put out to tender is forcing contractors to bid painfully low.

“The inertia could be broken if MPs make an eleventh hour conversion to the Prime Minister’s Brexit deal [tonight]. But with most predicting an extension to Britain’s political and economic deadlock, the construction sector is likely to continue facing the same challenge it has ever since the referendum – running a marathon starved of the oxygen of confidence.”

Source: UK Construction Media

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