Last winter we saw construction almost grind to a halt, along with the collapse of one the UK’s biggest construction companies, Carillion. Only a few months ago we were wondering if the government would ever rich its new build targets. All that has changed. Wherever you go in Essex you’ll now see construction taking place, from extensions and new homes through to major developments, and soon the start of new Essex Garden Villages.
More Building In Progress After Bad Weather And Major Company Collapse
The winter months since the turn of the year were a tough time in the construction industry with bad weather, including the ‘Beast from the East’, bringing construction sites across the UK to a standstill. We also saw the collapse of major construction company Carillion.
As spring got underway though, shoots of recovery were in evidence in the building and construction industry.
A Five Month High
Construction levels have hit a five month high led mainly by residential house building according to figures produced in the latest IHS/Markit purchasing manager’s index (PMI). The homebuilding index rose to 51.5 in April from a low of 48.1 in January – above 50 represents growth – while civil engineering work dropped hitting a PMI of just 47.3.
Overall though, the construction PMI is encouraging; it rose to 51.4 in February so accelerating quicker than economists had expected.
Technology Can Help Profitability
Increased technology within the construction industry can help boost profitability so a healthier bottom line on projects is likely. Improved surveying methods such as those provided by Sova Surveys, and construction techniques and more efficient project management, can help companies make a better return on their construction investments.
Two ‘beasts From The Easts’ And A Major Construction Company Collapse
The UK construction industry took a pasting from the UK weather and a significant economic event in the winter months so causing the downturn and the PMI index to drop:
‘Beast from the East’ – harsh cold weather and deep snowfalls hit the UK twice in quick succession as freezing air from the East struck. This caused many construction sites to grind to a halt as the worst of the weather hit and robbed the industry of valuable working time.
Carrillion collapse – the UK’s second largest construction company went into liquidation halfway through January due to a huge accumulated debt of £1.5 billion. The company had involvement in several high profile construction projects including the revamp to London’s Battersea Power Station, and holds many government contracts including some covering the construction and management of schools and hospitals.
Weakened London Demand And Economic Uncertainty
It’s true that in many parts of London demand for property and thus price inflation has diminished, but this isn’t the case in many other parts of the UK where demand is still high. The London figures, however, are tending to portray an unrealistically pessimistic view of the overall construction scene nationally – elsewhere there’s a healthy demand for property with many construction projects ongoing and many more in the pipeline.
Otherwise, economically speaking, general uncertainty influenced by the ongoing Brexit machinations, and possible political changes, has tended to breed caution in terms of whether to commit to new building projects or wait things out a while.
Job Creation Up
Considering the huge job losses when Carillion collapsed, a welcome surprise has been the buoyant job creation in the sector. Bearing in mind the government’s house building targets of one million new homes built by 2020 (and they hit the yearly target of 200,000 homes for the first time in 2017) it would appear there will be plenty of opportunity for residential construction growth in at least the shorter term.