UK construction activity survey news

RICS construction survey 2021, British Building Industry, UK Housebuilding Guide

UK construction activity to grow in 2022

6 July 2022

UK Construction PMI – seeing full impact of Ukraine war on prices

UK construction sector news in July 2022

Following the release of the latest UK Construction PMI today (6 July), Joe Sullivan, partner at MHA, believes the full inflationary effects of the war have now worked their way through the system, pushing more companies into insolvency but that supply constraints will stop house prices falling dramatically:

“In recent months we had seen material prices start to level off, but we’re now seeing the full effects of the war in Ukraine work their way through the system, driving up prices and ensuring we continue at these price levels for some time. Although the war began on 24 February, it takes time for the range of effects to work their way through. Together with these input cost increases, further shortages of raw materials like timber and manufactured goods such as generator components are behind the growing number of insolvencies in the construction sector.

“The remarkable success of the residential property market continues but the rate of price increases is now slowing. However, the restriction in the supply of new plots is the key factor which will guard against the house ‘price bubble’ bursting significantly. This makes the sub-sector a better investment bet than most others for the year to come. Vendors are trying to pre-empt a recession by becoming more reasonable in the prices they seek, trying to tie up a deal quickly rather than holding out for higher prices.

“Further wage increases are inevitable. Contractors are under pressure not only to maintain their current head count for existing work but to retain the individuals with the appropriate skills necessary for opportunities available for tender.

“Contractors are making progress with energy efficient delivery but the cost of investment and management time in achieving sustainable goals is starting to filter through the supply chain. This may preclude some subcontractors from involvement in future work, so firms need to pay great attention to this area, to stay relevant and to future proof their business.”

Previously on e-architect:

8 June 2022

UK Construction PMI – June 2022

UK construction sector news in June 2022

Following the release of the latest UK Construction PMI today (8 June), Brendan Sharkey, Head of Construction and Real Estate at MHA, believes buoyant housing demand and good management of supply chain issues mean the construction sector is holding up:

“The UK construction sector, particularly the residential housing market, is coping relatively well despite the ongoing cost of living crisis. Momentum may have slowed but given the circumstances, the sector is holding up well. The economy may be tough for many but the pandemic was actually good for household savings, allowing people on relatively modest incomes to build up a war chest which they can now put towards a deposit.

In addition, supply chain issues are no longer causing acute problems. Contractors and developers are usually able to get their hands on construction materials. Construction is a low margin business and some contractors will be running at a loss at the moment but the more financially stable companies are well placed to survive even if market conditions deteriorate.

“The sector isn’t crying out for government help but one issue the government needs to start considering more seriously is raising awareness of energy performance regulations among the public. Legally an EPC (energy performance certificate) is a requirement before selling a property. In 10-15 years’ time homes that don’t meet stringent energy performance standards will be unsellable.

Some buyers definitely know this and this is one reason why demand for new build properties is strong (as they are EPC compliant) but the government hasn’t explained to the average buyer how risky the purchase of a second hand home that falls short of energy efficiency standards will become. There is a sense ministers don’t want to rock the apple cart but it is crucial more buyers take a long-term view and invest in energy efficient properties or recognise what they are buying will need a retrofit during their ownership.”

4 February 2022

UK Construction PMI: Confidence rises but inflation remains the big threat

UK construction sector news

Following the release of the latest UK Construction PMI today (4 February), Steve Plaskitt, Partner at MHA, says the sector continues to face challenges from inflation and the forthcoming ban on red diesel, but the government’s Levelling Up white paper (published on 2 February) is very promising for the sector:

“The outlook for the UK construction sector remains positive, with plenty of work to go around and strong demand for new projects. The supply chain bottleneck has also eased for certain products (such as steel and timber) and unseasonal mild weather has boosted productivity on construction sites. Crucially the end of Covid-19 restrictions is further bolstering confidence.

“Inflation will continue to be the biggest challenge for the sector. Ongoing shortages of materials and labour, increased energy costs and rising wages in addition to the forthcoming Health and Social Care Levy, will all adversely impact profits. In the housing market rising inflation will also lead to higher house prices.

“These challenges will be exacerbated by the ban on red diesel for power generation linked to commercial purposes, which will affect generators, cranes and site vehicles from 1 April 2022. This ban is a major source of confusion and concern for the sector. Red diesel, which is just normal diesel dyed red to indicate its tax status, was effectively a rebate on fuel duty for companies using fuel on sites (like construction sites) rather than highways. To help meet climate targets the government is withdrawing this rebate. This means construction firms will end up paying more in fuel duty, which will create a major headache for companies already struggling with rising costs.

“Given these challenges government spending remains key for the construction industry’s continued growth and the Levelling Up White Paper, published on 2 February 2022, is a strong step in the right direction. The provisions for the creation of new affordable homes and the regeneration of dying high streets and derelict sites in towns are a real blessing for construction firms. This is especially the case for regional construction firms located in cities in the North and Midlands, such as Sheffield and Wolverhampton, which will benefit from the £1.5bn Brownfield Fund delivered by Homes England.”

3 February 2022

UK construction activity expected to grow despite labour shortages and soaring material costs

  • Construction workloads for the next year expected to remain positive
  • Builders continue to struggle getting materials or skilled workers like bricklayers to site
  • Despite positive outlook firms point toward Brexit and Covid as causing these problems

UK construction activity to grow City of London buildings

UK construction activity to grow news

Construction experts across the United Kingdom painted a positive picture for the industry over the next year with strong levels of activity expected despite mounting concerns around sourcing materials and labour, this according to the latest RICS construction survey for the final quarter of 2021.

In terms of workloads for Q4 2021, +33% of respondents said they continued to see increases in demand for construction work (the same level as reported in Q3). New infrastructure projects are seen to be behind the much of the increase in workloads, with a net balance of +40% – with energy developments particularly leading the way. Elsewhere the private housing sector also continued to show solid momentum with a net balance of +37% of respondents reporting new works in this area.

Looking to the year ahead, expectations of upcoming workloads edged up to a net balance of +45%. Infrastructure continues to be viewed as likely to lead the sector but both the private residential and non-residential works are anticipated as also delivering strong growth in output. The government’s newly announced ‘Levelling Up’ white paper, which sets out how billions in funding will be allocated toward regenerating towns and cities across the UK, could also support construction workloads through new infrastructure, housing and non-residential works.

Business enquiries were still firm in the final quarter (+37% in Q4 2021) which is also consistent with a more upbeat outlook for activity looking out over the next twelve months. Additionally, +10% of respondents also said profit margins are now anticipated to increase over the course of 2022 compared with just +2% in the last survey – which reflects the upbeat picture of the year ahead.

Despite the positive picture, concerns around the availability of materials (84%) and labour (77%) suggested these problems continue to dominate the UK construction sector – with factors like Brexit and the ongoing COVID-19 pandemic giving building firms a headache.

In terms of skilled labourers, 65% of respondents saying they had difficulties finding bricklayers and carpenters to deliver projects (although this was slightly less apparent for other skilled trades like plasterers and electricians). That said, the estimate for material costs is expected to jump by a further 9% over the period in question with skilled labour costs rising by more than 7% and unskilled costs by between 5 and 6%.

UK construction activity to grow in 2022

Simon Rubinsohn, RICS Chief Economist, commented:

“There is clearly an upbeat tone to the feedback received from across the construction industry. However, the concerns around labour and in particular, skilled labour are just not going away.

“The long-term fix is to attract more younger people to the sector but that may be insufficient to address the immediate problem which significantly, is being reflected in expectations for a sharp uplift in wage costs over the next year.

“The presumption from professionals working in the industry is that this rise in pay will help provide a short-term fix as the strong projections for activity through the course in 2022 are premised on a further rise in headcount.”

Bradley Tully, Senior Public Affairs Officer at RICS, said:

“The levelling-up agenda offers important opportunities for the construction sector to play a vital role in transforming areas that are in need of regeneration, and to demonstrate the power of the built environment in tackling inequalities.

“In order to create thriving places where people can live and work, we are clear that the levelling-up agenda must be underpinned by a reformed planning system that offers greater certainty, provides for sufficient local accountability and allows for the timely delivery of vital social infrastructure.”

RICS

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