Economic digest

Clay Technology magazine
,
17 May 2018

The number of construction projects has declined in the UK due to bad weather and a woefully unprepared industry. At the same time, more bricks have been manufactured, marking the anticipated start of a busy house building period. Ines Nastali reports.

Construction output fell by 1% during the three-month on three-month period to January 2018, representing the ninth consecutive three-month on three-month decline in output,’ the UK Office for National Statistics (ONS) stated. Figures published mirror the continued fall driven by less private commercial work, the ONS added. ‘New orders decreased by 25% in October to December 2017 following a record high in the previous quarter, caused by the awarding of several high-value new orders relating to the High Speed 2 rail poject,’ according to the monthly business survey, Construction Output. The survey collects output by sector from businesses in the UK construction industry. 

Output is defined as the amount chargeable to customers for building and civil engineering work done in the relevant period. ‘Compared with December 2017, construction output fell by £444 million in January 2018. The main contribution to the fall in all work came from private housing, which fell from a record high in December 2017, decreasing by £239m,’ the ONS said. 

Woefully unprepared

The IHS Markit/Chartered Institute of Procurement and Supply Construction (CIPS) Purchasing Managers’ Index (PMI) has also found an explanation for the low numbers. The heavy snow that the UK had to battle during the first months of 2018 contributed to fewer staff being able to get to work, which has resulted in ‘the fastest drop in construction activity since July 2016,’ it is stated in the report, published in April.

‘It’s been a few years since the UK experienced such bad weather in March and it’s obvious that supply chains were woefully unprepared to deal with the disruption,’ said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply. He added, ‘Although March’s figures could be viewed as a temporary blip, without a strong pipeline of work, and strong risk strategies in place, the sector’s health remains in question as we’re still a long way off seeing it operate the way it has over the last year.’

According to the IHS Markit/CIPS UK Construction PMI, ‘civil engineering and commercial activity were the most affected, as housing became the best performer’.

However, Brock warned, ‘The marginal improvement in residential building was softer than in most of 2017, indicating there may be something more serious ailing the sector, as respondents also cited continuing Brexit-related uncertainty and disappointment over the performance of the UK economy.’

More brick produced

More positively, the ONS announced that the number of bricks manufactured in the UK has risen by 10% compared to the same time a year ago, in January 2017, confirming the anticipated increase of new houses being built. According to the Brick Development Association (BDA), ‘This shows UK manufacturers continuing to increase production numbers, building on the 10-year high of 2bln bricks that was recorded for 2017.’

The BDA has noticed that, ‘Our manufacturers predict that demand from the house building sector in particular will remain strong and are planning accordingly,’ Tom Farmer, BDA spokesperson said. ‘They have therefore increased their production and we see the sector investing for further increases in brick numbers over the next year.’

Managers needed

The BDA’s expectations and the PMI follow research by the UK Construction Industry Training Board (CITB) that, despite uncertainties such as Brexit and the collapse of construction company Carillion, there will be more work available in the sector soon. It expects 150,000 jobs to be created in the UK over the next five years. 

‘The strongest job growth will be in a range of professional and managerial roles as the industry seeks to boost its productivity,’ according to this year’s Construction Skills Network report. In addition, ‘15,350 carpenters and 9,350 labourers will be needed as homebuilding ramps up’.

While the number of housing projects and infrastructure are expected to grow by around 2%, ‘the commercial sector is not predicted to grow at all over the next five years, as investors potentially hold back decisions due to Brexit uncertainty,’ it is stated in the report. 

‘Since Britain voted to leave the EU, many investors have been understandably cautious about committing to big, long term projects, preferring to plan a pre-construction point before releasing funds. This means that when the Brexit deal is complete, we may see delayed projects given the go ahead,’ said CITB Policy Director Steve Radley.

‘By 2022, employment will be in touching distance of the heady 2008 peak, so we face a massive recruitment and training challenge, which is likely to get harder after Brexit,’ he added. ‘So while we can take some comfort from weathering the recent storms, it’s vital that we make the investment in skills today that will shape our own destiny for tomorrow.’

Read the full CITB report, Construction Skills Network – Forecasts 2018–2022, here: bit.ly/2nG40sb