Construction Industry Facing an Uncertain Future

Construction Industry Facing an Uncertain Future

15th August 2016

In the run up to the Referendum held in June, we took several looks at what a Brexit could mean for the construction industry here in the UK.  Back in May we reported that construction recruiters predicted that a Brexit vote would have an adverse effect on the sector and make it more difficult to find suitably skilled workers to fill vacancies.  Well, now it’s official!  The Telegraph reported last week that construction activity here in the UK fell at its fastest pace for seven years and economists are warning that there will be more turmoil to come in the wake of the vote to leave the European Union.

Just as business leaders warned us, the decision to leave the EU has seen the construction industry doomed to a long period of uncertainty and a survey of the sector reveals that the Brexit vote is likely to impact adversely on spending decisions for some time to come.  This is blatantly obvious when you look at the Markit/CIPS construction purchasing managers’ index (PMI) which dropped from 51.2 in May to 46.0 last month.  

According to a senior Markit economist, construction companies are at the sharp end of domestic economic uncertainty and there’s a very real worry that this will carry on.  Housebuilding has been the poorest performing of the sub-sectors, followed by commercial activity which has suffered a sharp loss in momentum.

Since the Brexit vote (which, admittedly was a shock to many of us here in the UK), economic confidence has taken a severe knock and the downturn looks likely to get worse, rather than better.  Construction companies are reporting a decrease in orders and the slump in the construction industry is likely to push the overall economy into a recession in the coming quarters, according to some economists.  

The coming Brexit negotiations are likely to be a long and protracted affair which will result in businesses delaying any commitment to major capital expenditure and, with no review of public investment plans until the Autumn Statement, few construction projects are likely to be at the “shovel ready” stage.  The biggest reduction in output over the past year was in government backed housing construction while private housing projects have fared badly too.  However, there has been some growth in the private industrial construction sub-sector which grew by 7.3% on the year.

The UK needs new infrastructure to drive GDP, so construction companies across the UK will be eagerly awaiting the Autumn Statement.  However, there are still essential services that will need to continue despite a slowdown in construction – we still need homes maintained, we still need highways maintained, etc.

Economists are hoping that the Bank of England could take some steps to ease policy by slashing interest rates and embarking on a programme of quantative easing in order to stimulate the economy and this is something that we are likely to see happening sooner, rather than later.

Here at Safety Fabrications, we’re committed to keeping our readers up to date with any news that affects the industry, so watch this space for more updates in the coming months.