Construction Continues Trend of Steady Growth

THE CONSTRUCTION sector continued its trend of steady growth during January 2019, with work prospects growing by 2.8%, reversing the sharp decline seen in December 2018.

Despite a strong start to 2019, the latest construction sector figures from the Office for National Statistics (ONS) highlights a decline of 0.6% for all work during the three-month on three-month series. The decline is largely a result of weakness during December and October 2018, meaning January’s monthly growth was not great enough to recover any shortfalls in work.

Increase in new work
The fall in the three-month on three-month all repair and maintenance series was driven primarily by non-housing repair and maintenance, which fell by 3.2%, and private housing repair and maintenance, which fell by 2.3%. However, public other new work and infrastructure saw increases of £75 million and £104 million respectively, representing the two largest month-on-month increases in new work.

Strong growths were also seen in private housing repair and maintenance, and private housing new work, which grew by £56 million and £62 million respectively. Only two series saw falls month-on-month: public new housing saw a £33 million decline against December 2018, whilst private commercial new work fell by £145 million.

 

New orders
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.

Clive Docwra, Managing Director of McBains

Clive Docwra, Managing Director of construction consulting and design agency 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 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.”

Mark Dyason, Managing Director of development finance specialist, Thistle Finance, said: “The drop in new orders in the last three months of 2018 is understandable given that developers are building on the political equivalent of sand.

“Fears over Brexit, along with the other issues such as high import costs and the lack of skilled workers, are naturally impacting investment decisions. Developers are unable to predict the denouement of Brexit and so a more cautious, powder-dry approach is justified.

“Things would be a lot worse if the Help to Buy scheme wasn’t there to offset the political subsidence. The impact of Help to Buy is highlighted by the 2.3% growth in new housing during the fourth quarter.

“There are a lot of nerves but at the same time there are a lot of opportunities for savvy, financially strong developers. There’s also no shortage of finance options for experienced developers who can make the numbers stack up and are realistic with future valuations.”

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