Is the UK construction sector on the brink of recession?

Economic uncertainties are slowing down the UK construction sector.

The latest Construction PMI data, published in February 2019, showed a bleak outlook for the UK construction sector:

  • Slowest rise in construction activity for 10 months
  • Softest rate of job creation in construction since July 2016
  • Rising material prices

Slowest rise in construction activity for 10 months

The ‘Construction Total Activity Index’ which measures the evolution of the construction output dropped from 52.8 in December 2018 to 50.6 in January 2019.

This is the lowest level of growth of construction activity for the past 10 months.

The Federation of Master Builders (FMB) blamed ‘rising costs and the uncertainty relating to Brexit’ for this drop.

Softest rate of job creation in construction since July 2016

According to the UK Construction PMI, ‘construction firms reported the softest rate of job creation since July 2019’.

Anecdotally, I was having dinner with the Director of a construction company specialised in architectural glass at the end of January. He shared with emotion that he had to lay-off 4 members of staff that month. Property developers were delaying their decisions, waiting for the Brexit vote outcome. He shared: ‘In a case of no-deal, they will build apartment blocks. In case of a deal, luxury housing. In the first scenario, we have no business; in the second, we’re in.’

While sharing the results of the January 2019 UK Construction PMI survey, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: ‘the sector only needs a small nudge to tip it closer to recession.’

Rise in construction costs

The FMB’s research is also showing that 87% of builders believe that material prices will rise in the next 6 months. Furthermore, skill shortages in the industry are pushing salaries up.

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As shared by Neil Carberry, the Chief Executive of the REC (Recruitment and Employment Confederation): ‘in times of uncertainty, flexible working arrangements provide a crucial outlet for employers and workers.’

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