Developments Industry News

The UK Construction Sector Stalls – What Next for the Industry?

There’s no doubt that Brexit negotiations continue to dominate the hearts and minds of Britain’s politicians, particularly as the discussions become increasingly tense and acrimonious.

While Brexiteers will no doubt be pleased that the government remains focused on delivering a positive deal for Britain, however, there’s an argument that ministers may be losing sight of the economic and social issues that continue to plague the UK. Take the current contraction within the construction sector, for example, which has become evident during the first financial quarter and looks set to take hold throughout 2018.

In this post, we’ll look at the current performance of the UK construction sector and ask what’s next for this important and increasingly influential market.

How has the Construction Industry Stalled in Recent Times?

There’s no doubt that Britain’s builders have had a difficult start to the year, with construction activity remaining flat throughout January. This is according to a survey of purchasing managers within the sector, who have released their latest data to the financial markets.

More specifically, the IHS Markit construction PMI fell from 52.2 to 50.2 during December, while it is projected to decline further throughout the quarter. This represents a seminal development, as a reading over 50 indicates expansion while anything below this signals the onset of a contraction. The figures are even more concerning given that analysts have forecast a reading of 52, as this highlights the fact that the market is performing far worse than expected.

There are two issues that continue to undermine the market, starting with the fact that a number of large commercial and infrastructure projects came to an end during 2017 without being directly replaced. Similarly, house building also contracted due to labour shortages and ongoing economic uncertainly, and both of these challenges have indirect links to the volatility that has been triggered by the ongoing Brexit discussion.

What Next for the Construction Industry in the UK?

Expert service providers such as DWF Law are well aware of this contraction, particularly given the sudden decline in the number of large-scale commercial and infrastructure projects. Although this has been partially offset by a marginal increase in the number of smaller commercial structures built during the last six months of 2017, this is not enough to assuage concerned stakeholders and construction firms in the UK.

Not only this, but additional figures also suggest that the rate of job creation within the sector fell to its lowest level in 18 months towards the end of 2017, and this is arguably of greater concern for those in the sector. After all, this is yet another indicator of contraction within the marketplace, and one that has wider economic connotations given the disproportionately high rate of inflation in relation to earnings.

The Last Word

This is certainly a space to watch in the near-term, with the construction sector a core foundation of the UK economy. There’s a sense that things could arguably get worse before they get better, with some experts predicting that growth within the construction sector could well be constrained until the Brexit negotiation process is completed.

 

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