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UK construction output declines for third consecutive month

Output in the UK construction sector declined for the third month running in July as lower volumes of work were recorded across all three broad categories of activity.

The IHS Markit/CIPS UK Construction Total Activity Index recorded 45.3 in July – below the 50 no-change value – to mark the third consecutive monthly fall.

The latest reading was up from June’s ten-year low of 43.1 but still signalled a marked downturn in total construction activity.

The latest survey also revealed a sharp drop in new order intakes, which survey respondents mainly attributed to subdued economic conditions and domestic political uncertainty. Weaker demand contributed to a slide in business optimism towards the year-ahead outlook for construction activity, with the degree of confidence the lowest since November 2012.

Commercial construction was the worst-performing category in July, followed closely by civil engineering activity. Anecdotal evidence suggested that risk aversion among clients in response to Brexit uncertainty continued to hold back work on commercial projects. At the same time, some survey respondents noted that delays to contract awards for infrastructure work had acted as a headwind to civil engineering activity.

Housebuilding fell for the second month in a row during July, but the rate of decline was only modest and eased from the three-year record seen in June. Reports from construction companies suggested that sluggish housing market conditions had a negative influence on residential work during the latest survey period.

July data pointed to a downturn in total order books across the construction sector for the fourth successive month, which is the longest continuous period of decline since 2016. Lower volumes of new business were often linked to a lack of tender opportunities amid weaker domestic economic conditions and ongoing political uncertainty.

Employment numbers were cut back in response to deteriorating order books, although the rate of job shedding was only modest and largely reflected the non-replacement of voluntary leavers. Sub-contractor usage meanwhile decreased for the sixth consecutive month.

Demand for construction products and materials continued to soften, as signalled by a solid drop in purchasing activity during July. This helped to alleviate some of the pressure on supplier capacity, with lead times lengthening to the smallest extent since September 2016. A robust rate of input cost inflation persisted in July, partly reflecting rising prices for imported items and those in short supply (particularly insulation and plasterboard).

Construction companies meanwhile reported a sharp drop in their confidence regarding the year-ahead outlook for business activity. The latest reading was the lowest since November 2012. Survey respondents often cited Brexit uncertainty, the prospect of a General Election and delays to infrastructure work.

Tim Moore, economics associate director at IHS Markit, said: “UK construction output remains on a downward trajectory and another sharp drop in new orders has reduced the likelihood of a turnaround in the coming months.

“Total business activity declined at a softer pace than the ten-year record seen in June, but this should not detract attention from the challenges ahead for the construction sector. Customer demand has been squeezed on all sides in recent months, which has pushed down business expectations to the lowest since the second half of 2012.

“July data revealed declines in house building, commercial work and civil engineering, with all three areas suffering to some degree from domestic political uncertainty and delayed decision-making.

“Construction companies have started to respond to lower workloads by cutting back on input buying, staffing numbers and sub-contractor usage. If the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain and spillovers to other parts of the UK economy will quickly become apparent.”

Responding to the statistics, the Federation of Master Builder (FMB) called for a delay to the implementation of Reverse Charge VAT.

Brian Berry, chief executive of the Federation of Master Builders, said: “The fall in construction activity for the third month in a row and business optimism being at its lowest levels since 2012 means the building industry is heading towards crunch time. The Government must immediately postpone its plans for a complex and burdensome tax change if the supply chain is to start to turnaround its consistent decline. The time is not right to implement Reverse Charge VAT, which would restrict cashflow and add extra administrative burdens which risk sending small businesses to the wall. The government’s guidance on the policy is confusing and complex, and it wasn’t published with enough time for companies to prepare.”

Berry added: “Reverse Charge VAT, Making Tax Digital and a no-deal Brexit will create the perfect storm for construction’s small businesses, and today’s PMI data shows that the resilience is not there to weather it. If we are to deliver the housing and infrastructure that we need now and in the future, we will need to maintain capacity in the construction industry which means looking after the supply chain. The government must support the industry by delaying Reverse Charge VAT for six months at least.”

Mark Robinson, Scape Group chief executive, added: “New work and business optimism dropped in July as customer demand plummeted for the third month in the row, in response to the increasingly gloomy economic outlook and heightened political uncertainty.

“A no-deal Brexit in October is looking more likely than ever – which is terrible news for the sector. Not only is the knock-on effect on the pound likely to make the cost of construction materials shoot up even more, but an end to free movement will see thousands of skilled workers return home, further deepening the skills shortage that the sector faces.

“All eyes are now on Boris to get Britain building again. Bold decision making, clear commitments, and guaranteed funding for infrastructure investment all have a proven track record of igniting economic recovery and growth. We are counting on his ‘can do’ attitude to cut through the paralysis on decision-making we are experiencing in the public sector.

“With just three months until our Brexit date, there is no room for error. Boris’ government now hinges on a majority of one, but right now a general election will only further distract Whitehall from the issue at hand – securing a deal that works for all.”

Source: Scottish Construction Now

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New affordable homes to be built on site of former Wigan scrap yard

Jigsaw Homes Group has had a planning application approved to build 49 high-quality affordable homes on the site of a former scrap yard on Pocket Nook Lane in Lowton.

The new development will comprise a mix of one-bedroom apartments, two-bedroom and three-bedroom houses, providing a much needed range of quality affordable accommodation for Lowton.

Jigsaw has committed to carrying out decontamination of the site as part of the development process, turning a derelict and contaminated piece of land into a place fit for habitation.

Funding has been secured from Homes England through its Shared Ownership and Affordable Housing Programme (SOAHP) 2016-21.

Garnet Fazackerley, Jigsaw Group’s operations director for development said: “We are delighted to receive planning permission to develop 49 affordable new homes on a former industrial brownfield site.

“Jigsaw Group is committed to tackling the housing crisis by building new homes for the people in our communities.

“We have plans to develop over 2,000 new homes by 2022 and developments like this one bring us one step closer to that goal.”

Work is due to begin this Autumn, with completion likely to be in 2021.

The new homes will be let and managed by Adactus Housing Association, part of the Jigsaw Group.

By Neil Hodgson

Source: The Business Desk

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UK construction market suffers sharpest decline since March 2018

Business leaders across the UK construction industry have blamed a combination of political uncertainty and Brexit for the gloomy figures in the latest IHS Market / CIPS UK Construction Total Activity Index report.

The report stressed that business optimism amongst the construction industry is its weakest since October 2018, with survey respondents also widely citing concerns that domestic political and economic uncertainty would dampen business activity growth over the next 12 months.

The reports key findings include:

  • Another fall in construction output in May means the sharpest decline since the snow-related downturn in March 2018.
  • Commercial work remains the weakest performing category, with output falling to the greatest extent since September 2017.
  • The sharpest decline in workforce numbers since November 2012.

Tim Moore, associate director at IHS Markit, said: “May’s data reveals another setback for the UK construction sector, as output and new orders both declined to the greatest extent since the first quarter of 2018. Survey respondents attributed lower workloads to ongoing political and economic uncertainty, which has led to widespread delays with spending decisions and encouraged risk aversion among clients.”

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: “With the continuing uncertainty around Brexit and instabilities in the UK economy, client indecision affected new orders and particularly affected commercial activity. Policymakers will need to pull a large rabbit out of the hat, and fast, to improve these difficult conditions and prevent a further entrenchment of gloom and contraction this summer.”

Blane Perrotton, managing director of property consultancy and surveyors Naismiths, said: “There is precious little to cheer in this altogether bleak PMI report. New orders, confidence levels and recruitment are all down. Housebuilders have managed to keep growing, just. But their modest expansion in output has been dwarfed by the declines in commercial property and infrastructure building. While the residential sector is stoically grinding on, the industry as a whole is running to stand still. With investor confidence being pummelled by a double whammy of Brexit and political uncertainty, what work there is dominated by the completion of existing projects rather than new ones.”

Jonathan White, UK head of infrastructure, building and construction at KPMG, said: “The steady stream of infrastructure work across the UK had strengthened order books and buoyed confidence, but there is a clear sense that the market is slowing down in the commercial sector as the Brexit impasse puts a halt on decision-making. The hope is that the forthcoming Infrastructure Finance Review, for which the consultation closes later this week, will offer some clarity on how to finance the projects that will feed contractors’ pipelines in the future.”

Mark Robinson, Scape Group chief executive, said: “The lack of clarity over the future leadership of the current government is hurtling us into uncertainty. We thought progress in infrastructure and safeguarding the future of the construction industry was a low priority before. It will be even further from ministers’ minds now. This government won its mandate on a commitment to invest in UK plc, ensuring the country continues to attract business and good jobs across the whole country. But now a reluctance to spend and a lack of decision making is holding the UK back, stopping the country reaching its potential.

“The only way to increase confidence is to treat today’s economic and political climate as the new normal. That means we need to get on with the business of building. Firms should take advantage of the easing of raw material costs while they can and press ahead with planned projects. Only then can we ensure that this weak period for the sector does not turn into a prolonged and painful slump.”

By Rob O’Connor

Source: Infrastructure Intelligence

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UK construction sector shrinks for second consecutive month

UK construction sector contracted in March for the second month in a row, it was revealed today, as a slowing commercial market and Brexit uncertainty weighed on the sector.

The construction purchasing managers’ index (PMI) stood at 49.7 in March compared to 49.5 in February, the first back-to-back fall in output since August 2016. A score of under 50 marks a contraction compared to the month before.

The PMI, part of a survey released by IHS Markit and the Chartered Institute of Purchasing and Supply (CIPS), gives a comprehensive overview of the health of the sector.

Commercial construction – building for the private sector – was the worst performing area during the latest survey period, with widespread reports in the survey of Brexit uncertainty leading to lower client demand.

Residential construction bucked the trend, however, and saw the strongest upturn so far in 2019. This was despite statistics from mortgage lender Nationwide that last week showed UK house price growth was soft in March, having been dragged down by London’s worst house price drop in a decade.

There was also a modest rise in staffing levels at UK construction companies while business optimism edged up from the four-year low seen in February, IHS Markit/CIPS said.

However, Duncan Brock, group director at CIPS, said: “Not a small rise in job creation, optimism and new orders, nor resilient house building, were enough to buck the underlying downward trend in a sector suffering from client hesitation and consumer gloom,” he said.

He added: “The fault of this continuing inertia was placed squarely at the feet of Brexit.”

Yet Samuel Tombs of Pantheon Economics was more optimistic, saying: “With mortgage rates unlikely to rise much even when the [Bank of England’s] monetary policy committee starts to increase the bank rate again and the Help to Buy scheme set to operate at least until 2023, housebuilding should keep rising.”

He said: “Meanwhile, high profit margins and low borrowing costs lay good foundations for a recovery in business investment in the second half of this year, provided Brexit uncertainty subsides.”

Businesses faced higher costs in March, the survey revealed, with higher raw material prices due to the weak sterling exchange rate and a pick up in inflation.

IHS Markit economist Joe Hayes said: “Fears that the recent weakness of the UK construction sector may not be just a blip, but a sustained soft patch, were further fuelled by latest data.”

“UK construction businesses ramped up their purchases of materials and other inputs, reflecting efforts to build safety stocks ahead of any potential Brexit-related disruptions,” he said.

Yesterday it was reported that such stockpiling had caused the manufacturing sector PMI to hit a 13-month high as the industry responded to higher client demand.

However, Hayes said that in construction stockpiling meant that “supply chain constraints persisted and average input lead times lengthened once again.”

By Harry Robertson

Source: City AM

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Construction output rises despite Brexit uncertainty, says FMB

The Government must not be complacent about the damage a ‘no deal’ Brexit would cause amid positive signs of growth in the UK construction industry, says the Federation of Master Builders (FMB).

Commenting on the construction output figures for November 2018, published by the Office for National Statistics, Sarah McMonagle, Director of External Affairs at the FMB, said: “The UK construction sector grew by 2.1 per cent during September to November 2018 compared with the previous three months. This is despite unparalleled levels of political uncertainty around the very real prospect of a ‘no deal’ scenario. However, we are urging the Government not to allow these results to create a false sense of security. Since November, political uncertainty has cranked up and is increasing every day. A growing and prosperous construction sector will be a distant memory if the Government allows the UK to crash out of the EU without a deal in place.”

McMonagle concluded: “The construction industry is also extremely concerned about the Government’s proposed post-Brexit immigration system. In the Immigration White Paper, published at the end of last year, the Government revealed that they will make few allowances for low skilled workers to enter the UK post-Brexit. Most tradespeople will be defined as low skilled and therefore will not be permitted to enter the UK, regardless of whether they are from the EU or further afield. It is crucial that the Government introduces a post-Brexit immigration system that continues to allow us to draw on essential migrant workers or else their house building and infrastructure targets will be totally unachievable.”

Source: Politics Home

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Construction sector grows but uncertainty remains

Official figures released today have revealed that the UK construction industry has continued to grow over the last quarter despite uncertainty around Brexit. 

The IHS Markit/CIPS UK Construction Total Activity Index posted its second-highest level in 16 months at 53.2 in October, up from 52.1 in September.

However it was still some way below the long-run survey average of 54.3.

This was in part due to a slowdown in housebuilding across the UK which has put a drag on the construction industry.

Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, said: “The construction industry is enjoying an Indian Summer.

“True, the surge in output in the third quarter is flattered by comparison with the grim decline of the first quarter and the plodding indifference of the second. But this is real, and welcome, progress.

“Housebuilding retains its crown as both poster child and ‘get out of jail’ card for the industry as a whole. Housebuilders delivered a half billion boost to the industry in the third quarter, but elsewhere the growth was patchy at best. Infrastructure work remains in positive territory but output is down, with contractors focusing on finishing existing projects rather than starting new ones.

“Among developers there is a widening confidence gap between the overheated South East and other areas where demand is stronger and margins better.

“Despite a marked improvement in the Brexit mood music this week, months of deadlocked negotiations have choked investor appetite. Unless and until the political limbo is ended, the industry will continue its holding pattern of two steps forward and one step back.”

Source: Mortgage Introducer

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Glasgow leads the way as competition for development land drives values across UK

The UK residential land market is reflecting the shape of the housing market, as values fall in central London but continue to rise in other regions, with Scotland the standout performer, according to international real estate adviser Savills.

Across the UK, greenfield and urban land values have grown by 1.9% and 6.9% respectively over the past year, albeit values remain 13 and 23% below their pre financial crisis level.

Growth has been supported by the strength of the Scottish land market, where annual growth stands at 6.0% and 6.2% respectively and greenfield values rose 1.0% in the last quarter alone, and urban land values by 2.5%.

A scarcity of developable sites in Scotland’s most in-demand locations, particularly in and around Glasgow, has led to increased competition for land, underpinned by house price growth of 7.7% year on year, well ahead of the 3.8% UK average.

Jamie Doran, Savills development director, said: “A strong Scottish housing market, particularly in Glasgow and Edinburgh, has fuelled demand for well-located development sites: the key challenge is the availability of developable residential land in these areas.  The lack of supply of sites with planning consent is driving value. Value rises are greatest in prime hotspots within the city, ie the south –side of the city and West End, but also in the city centre where there a number of new developers entering the market.”

Emily Dorrian of Savills Research said: “The Scottish Government’s More Homes Policy is looking to deliver 50,000 new affordable homes by 2021, supported by increased access to grant funding. This is encouraging registered social landlords and local authorities to become more active within the development market.  Further, the Help to Buy programme in Scotland is supporting the private sector in delivering units up to £200,000, a key first time buyer threshold.

“North of the Border, developers also do not have access to the same suite of infrastructure funds to support the development of land where significant remediation or infrastructure is required. This, along with planning consent, is constraining the delivery of housing at certain sites in Scotland.”

Source: Scottish Construction Now

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Mayor demands better new homes in Shrewsbury planning row

Controversial plans for 164 houses on land off Otley Road have moved a step closer. Council officers have recommend that the plans are approved – but Shrewsbury Town Council has objected to the development, with the mayor today saying the town deserves better quality houses.

The plans are part of a much larger scheme of up to 550 houses, commercial development, a hotel, a care home of up to 70 beds and supporting local centre and community uses.

Work will also involve the building of new estate roads and associated highways works, associated infrastructure, associated earthworks, and landscape works including informal open space and children’s play area, which were given outline permission in 2015.

Shrewsbury Town Council has objected to the plans for the houses and said that there are not enough open spaces, lack of parking, and lack of affordable housing.

Shrewsbury’s mayor Jane MacKenzie said she will personally be objecting over the lack of quality and she said she is organising a public meeting to set up a list of principles for quality development to be handed to developers at the first stage of a planning application.

Standards

She said: “I’m going to be objecting over the quality of the building, the lack of imagination and the low standards that property developers seem to be getting away with.

“We’re hoping to set up a meeting next month and develop a list of principles which will go to Shropshire Council’s planning department and be handed out to developers at the first stage of the planning process.

“We’re getting the same old developers thinking they can just push something through that doesn’t support the culture and heritage of Shrewsbury.

“It’s very disappointing, people deserve better. It’s about the next generation not us.

“I’m organising the public meeting for people who are tired of what’s happening in Shrewsbury with the development.

“We need development, but just better quality development.”

The public meeting will take place at The Guildhall on April 28.

Bellway Homes Ltd have applied to build the homes which would consist of 15 two bedroom houses, 72 houses with three bedrooms, 52 houses with four bedrooms, which would all be private housing.

There would also be a number of affordable homes including four one bedroom apartments, 14 two bedroom houses and seven three bedroom houses.

Shropshire Council’s central planning committee will make a decision on the plans on Thursday in Shirehall.

Source: Shropshire Star

 

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17 new homes could be built in Guernsey

Seventeen new houses could be built on a field near Vale School in Guernsey.

The island’s Planning Department have submitted a framework for developers to build on the agricultural land at Camp Dolent on Tertre Lane.

The site is 5-10 minutes walk from St Sampson main centre with Vale School and petrol stations nearby.

The Draft Development Framework gives a wide-range of guidance on the use of the plot, including:

  • Neighbouring residential development – There are no immediately adjoining residential properties. However, new development must respect the residential amenity of neighbouring properties to the south and west of Tertre Lane, including consideration of privacy and overlooking.
  • Access – The existing vehicular access is not suitable for a residential development of the scale proposed. Development on this site provides an opportunity to enhance pedestrian safety and access by providing a public footpath along Tertre Lane.
  • Design- Two storey buildings constitute a more efficient use of land than single storey buildings and therefore development proposals should consider a multi-storey design from the outset.
  • Renewable Energy – Proposals for the incorporation of renewable energy installations into the design of the development, such as solar tiles, is encouraged.

Based on the site, the Framework predicts between 8-17 dwellings.

Islanders are being asked to give their views before Friday 6th April.

Source: iTV

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Construction sector records worst decline since 2013 as new work dries up

Output in Britain’s construction industry fell at the fastest annual pace for five years in January as a slowdown in commercial developments and house-building hit the sector hard.

Figures from the Office for National Statistics show that output fell by 3.9%, the biggest year-on-year decline since March 2013.

Monthly figures also made for grim reading, falling 3.4% between December and January, while new orders decreased by 25% in the fourth quarter.

Economists had expected a monthly decline of just 0.5%.

“Construction continues to be a weak spot in the UK economy with a big drop in commercial developments, along with a slowdown in house-building after its very strong end to last year,” ONS senior statistician Ole Black said.

Investment in commercial developments, particularly in London, has fallen off a cliff since the Brexit vote as higher construction costs and uncertainty has seen developers delay new schemes.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Commercial work will continue to fall if, as we expect, progress in Brexit talks remains slow.

“We doubt that house-building will recover fully soon. The prospect of further increases in interest rates is subduing buyer demand both for new and existing homes.”

The ONS data dump also included figures which show that Britain’s industrial production rebounded in January following a boost in manufacturing and North Sea oil and gas production.

Manufacturing grew 0.1% in January month on month, representing the ninth month in a row of growth for the first time since records began in 1968 as factories benefit from strong global demand and a weak Brexit-hit pound.

Industrial production grew 1.3% in January, with growth driven mainly by the reopening of the Forties oil pipeline, which was shut down for three weeks after a crack was discovered in December.

Mining and quarrying provided the largest upward contribution, increasing by 23.5%.

“Manufacturing has recorded its ninth consecutive month of growth but with a slower start to 2018. Total production output continues to advance, bolstered in January by the Forties oil pipeline coming back on stream after December’s shutdown,” Mr Black added.

Figures also showed the UK trade deficit widen by £3.4 billion in good and services to £8.7 billion, with the ONS citing rising oil prices making for more expensive fuel imports, which rocketed 21.4%.

This contributed to a £3.2 billion widening of the trade in goods deficit.

Source: BT.com