Construction Productivity on the Rise but Could Brexit Threaten Progress?
The latest ONS figures paint a positive picture of recovery for the UK construction industry, showing that output has risen by 0.9% in the second quarter of 2018. After a tough start to the year that was primarily attributed to poor weather conditions and the “Beast from the East,” is the industry in the clear? As Brexit approaches and EU migration falls, can the UK meet government targets?
ONS statistics mark an encouraging result for construction firms and provide an optimistic start towards recovery despite predictions. Not only this, but the most recent survey by the Chartered Institute of Procurement and Supply and IHS Markit showed that in June the sector experienced the largest upturn in construction material purchases in 2 years.
PMI figures experienced sharp growth from 53.1 in June to 55.8 in July, the most significant increase in overall construction output since May 2017. Respondents commented on improving demand conditions and higher volumes of new project starts.
Additionally, warmer weather following the “Beast from the East” is said to be having a positive impact on the economic boost in the sector, allowing firms to catch up with work. Between May and June, output increased by 1.4%, following an increase of 2.9% between April and May. Tim Moore of the IHS Markit stated that July statistics “reveal an impressive turnaround in the performance of the UK construction sector, with output growth the strongest for just over one year.”
Housing projects are said to be driving the increase in figures, with the latest PMIs pointing to the strongest growth in residential activity since December 2015. The rebound indicates that challenges faced by builders in 2018’s first quarter can be attributed to poor weather, rather than more significant problems in the construction trade.
Mark Robinson, chief executive of Scape Group, said that “It is particularly promising that housebuilding continues to remain a key contributing factor to higher levels of activity.” Although these figures provide hope for UK building firms, Robinson also pointed out that “despite these encouraging signs it is concerning to see that publicly funded construction projects in the health and education sector are falling, and in June accounted for only 5.3% of total construction work.”
Not only this, but static Brexit talks and a drop in EU migration are sparking concerns of further potential setbacks for the construction sector. According to ONS statistics published this month, EU net migration stood at 87,000 for the year by the end of March 2018, which is at its lowest since 2012. With housing projects lighting the way for the construction industry’s recovery, the sector could undergo more turbulence depending on the outcome of Brexit talks.
With government targets set on building 300,000 homes a year by 2020, renewed concerns have surfaced regarding just how the construction industry will cope with residential demands in the UK post-Brexit. Around 30% of the construction labour force in London are EU nationals.
These migration statistics are “deeply worrying” according to Sarah McMonagle, director of external affairs at the Federation of Master Builders.
“We can’t afford to lose any more EU workers as currently two-thirds of construction SMEs [small and medium-sized enterprises] are struggling to hire bricklayers and 60% are struggling to hire carpenters and joiners,” she said.
“If the government wants its new homes and infrastructure projects built, it needs to do more to back up our industry’s message to all EU workers – they are welcome and they do have a bright future here in the UK.”
The construction sector is not in the clear yet, and firms must remain cautious of challenges that Brexit will bring. It is a relief for the industry that construction productivity is once again on the rise; however, the government will have to endeavour to ensure that the right Brexit deal is made if it wishes to see building targets met.