Sector issues warning as construction output flat-lines
The Federation of Master Builders (FMB) has blamed rising costs and continued uncertainty over Brexit for a drop in construction output.
Latest construction output figures for October 2018 published by the Office for National Statistics (ONS) show a small decline of 0.2%, compared with the previous month which saw output grow by 1.7%.
The decrease in October 2018 was driven by declines in infrastructure (down 3.7%), public new housing (down 8.1%) and total repair and maintenance (down 0.8%); the largest contributor offsetting these decreases was private new housing, which grew by 2.4%.
Sarah McMonagle, director of external affairs at the FMB, said: “The UK construction sector is more or less flat-lining with a small decline of 0.2% in October compared with the previous month. Rising costs for large and small construction firms are contributing to the slight drop in construction output. Recent Government statistics show that in the past year, there were nearly 3,000 insolvencies in the construction industry. While wages are continuing to rise because of the ever-worsening skills crisis in our sector, firms are also feeling the pinch because of the rising cost of materials.
“The depreciation of sterling following the EU referendum has meant key materials have become more expensive. We are expecting material prices to continue to squeeze the margins of construction firms with recent research from the Federation of Master Builders showing that almost 90% of builders believe that prices will continue to rise in the next six months.”
McMonagle added: “The future is still looking uncertain for the UK construction sector because the Government has set out plans for a post-Brexit immigration system that would severely worsen the skills shortage. The Government has said it will limit the number of low skilled workers entering the UK from the EU and further afield. This would include thousands of tradespeople, including bricklayers and carpenters, and these roles are ones that the construction sector relies on.
“More than 9% of the UK’s construction workers are from the EU and this rises to one third in London. It is therefore imperative that the Government listens to the needs of the sector and delivers a post Brexit immigration system that allows us to draw on essential migrant workers. Without this, we won’t be able to keep building at the current rate and construction output will continue to fall.”
Despite the slight month-on-month decline, construction output in the three months up to October was 1.2% higher than the previous three-month period. This growth was slower than in recent months, with a steady decline being seen from a 2018 high of 3.0% growth for the equivalent series in July 2018.
A historic high level of £9,221 million in the new work chained volume measure seasonally adjusted series was reached, representing the highest value seen since monthly records began in January 2010.
New orders grew by 3.4% quarter-on quarter in July to September 2018, with a strong increase in public other new work of 31.9% helping offset a 5.3% decline in housing new orders. Despite this increase, levels remain below those typically seen over the last five years of new orders data.
Allan Callaghan, managing director at Cruden Building, said: “As we reach the end of the year, the demand for more housing across Scotland - both private and affordable homes, shows no sign of slowing up.
“Key to meeting this demand will be investing in planning and other statutory approvals and having adequate resources from planning departments to deal with all applications, allowing construction companies to start on site without any delays.
“The latest stage of the Planning Bill has seen 244 amendments agreed, many introducing new roles and responsibilities for planning authorities and the Scottish Government. Although these amendments might seem like a step in the right direction, it’s set against a backdrop of already under-resourced local authorities. It’s imperative that we have a Planning Bill that has the right processes in place to speed up the system if we want to guarantee future development right across the country and alleviate the problem for young people who are struggling get on the property ladder.”