Snowy weather stops play

Bad weather is to blame for subdued construction activity at the start of 2018, according to the latest round of market reports.

The seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) fell sharply from 51.4 in February to 47.0 in March, to register below the 50.0 no-change threshold for the first time in six months. Moreover, the latest reading signalled the fastest overall decline in construction output since July 2016. Where a drop in work was reported, survey respondents noted that unusually bad weather had disrupted staff availability and activity on site.

The CPA’s State of Trade Survey for 2018 Q1 also showed that the £56 billion UK construction products manufacturing industry suffered a weak start to 2018, in a quarter that combined the liquidation of Carillion and several days of disrupted activity due to snow and freezing temperatures.

The CPA said that heavy side manufacturers recorded the lowest balance in five years with 15% of firms reporting a decline in sales in Q1, following a previous quarter of falling sales in 2017 Q4. For light side manufacturers, no firms on balance reported either an increase or a decrease, which was the weakest performance since 2013 Q2.

Manufacturers anticipate a return to growth in the coming quarters, but rising costs continue to act as a headwind; 90% of heavy side manufacturers and 84% of those on the light side reported a rise in raw materials costs in Q1, while the same proportions reported an increase in wages and salaries. In addition, fuel costs rose for 90% of heavy side manufacturers.

The IHS Markit/CIPS UK Construction PMI said that despite a sustained soft patch for new work, latest data revealed that employment growth accelerated to a three-month high. Additional staff hiring was attributed to forthcoming project starts and long-term business expansion plans. At the same time, sub-contractor availability continued to decline, which contributed to the strongest rise in their average prices charged since September 2017.

Brian Berry, chief executive of the Federation of Master Builders, said: “The cold snap impacted on a broad array of construction projects, including house building, domestic refurbishment and large civil engineering projects. Many small builders across the country were forced to close sites for more than a week and some employers reported that it was too cold to lay bricks.

“Alongside the snow, the cost of doing business is rising for the UK’s construction firms. Wages and salaries are all rocketing because of the ever-worsening skills shortages in construction. What’s more, material prices have been rising steadily since the depreciation of sterling following the EU referendum. Increased prices for metals and insulation in particular were noted in March. We expect material prices to continue to cause a headache for the construction industry with recent research from the FMB showing that 87% of builders believe that material prices will rise in the next six months.”

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “It’s a few years since the UK experienced such bad weather in March and it’s obvious that supply chains were woefully unprepared to deal with the disruption. So, though March’s figures could be viewed as a temporary blip, without a strong pipeline of work, and strong risk strategies in place, the sector’s health remains in question as we’re still a long way off seeing it operate the way it has over the last year.”

The FMB’s Brian Berry said the future is still looking uncertain for the UK construction sector.

“We still don’t know what the post-Brexit immigration system will look like, and given that businesses need to plan ahead, this could also be putting a brake on growth in the construction sector,” he said. “Our sector is heavily reliant on EU tradespeople with more than 8% of construction workers hailing from the EU. In London, this rises to one third.”