Concerns grow as output slows

Following on from the latest construction output data from the ONS, the industry has reacted with concern. With housing, and infrastructure in particular, being lauded as the highlights throughout the year, industry figures have noted the latest drop off as a major concern for the sector.

Matthew Pratt, Chief Operating Officer at Redrow, commented: “It’s disappointing to see output in new private housing down on the month across the industry – particularly as this is not something that we’re seeing at Redrow. Month on month figures can however be volatile and it is perhaps more encouraging to see a strong uplift in the annual figures which registered a rise of 4% year-on-year. Today’s data indicates that despite Brexit uncertainty, housebuilders are actively delivering more homes across the country to help meet demand and fulfil the Government’s housebuilding target.

“While Brexit continues to be the main priority for Boris Johnson, we are hopeful that matters related to housing will be addressed within the Queen’s Speech and that we may have some clarity on support for the sector. To ensure the economy remains as strong as possible after we leave the EU, the housing market must be high on the Government’s agenda and we absolutely don’t want to see today’s monthly decline continue in future months.”

While Mark Robinson, Scape Group chief executive, noted: “The construction industry remained relatively buoyant towards the end of the summer, as overall construction work increased by £28M on the month. However, other performance indicators have shown a drop off in work in September, and the bad news is that outlook is likely to deteriorate further in the coming weeks in reaction to further political turmoil.

“Infrastructure work, in particular, was already showing signs of faltering in August, as it declined by £25M. The steepest decline we have seen all year. To stop further downturn the government must stick to the delivery of promised big-ticket projects, such as HS2. The aspirations of the Northern Powerhouse initiative are intrinsically linked to strengthened transport links, as this keeps our local communities moving and our economies growing.

“Cutting the route short in the Midlands or scrapping the project altogether would be detrimental for not only the growth of the industry but our regions too.

“With just one week to secure an agreement with the EU, a no-deal Brexit looks increasingly likely. This outcome has the potential to plunge the economy into further uncertainty and the departure of thousands of non-EEA construction, causing an unprecedented skills deficit. Greater transparency from Boris Johnson about his plans would allow the industry to better prepare. Time is running out to get this right.

“Without clarity, building will simply stop in certain corners of the UK – an outcome that absolutely no one voted for.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, commented: “The see-sawing has finally settled into stagnation.

“The construction sector is back into a holding pattern – with overall output flat and the growth in new work cancelling out the fall in repair and maintenance jobs.

“But beneath the benign surface, sentiment is increasingly resting on a knife-edge. A Brexit deal – any Brexit deal – could uncork months of repressed demand and send output racing back up to more normal levels.

“But a chaotic ‘no-deal’ exit, or even an extension to the agonising limbo, could lead to the plug being pulled on deferred projects.

“With contractors’ order books getting thinner by the month, this is depressing tender prices as firms bid ever lower for work. Builders are seeing their margins eroded to dangerously low levels as material and labour costs continue to ratchet up – driving a steady stream of contractors to the wall.

“While the construction sector is adept at riding out peaks and troughs in demand, the worry is that the longer the crushing uncertainty goes on, the harder it will get for it to respond when the recovery eventually comes.”

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