The shrinking UK construction sector - Resolve Group UK

The shrinking UK construction sector

Resolve Group UK

The shrinking UK construction sector

Latest statistics show that the UK commercial construction sector contracted again in March 2019.

Continued economic uncertainty has made businesses unwilling to commit to new projects, according to a survey recently released by IHS Markit and the Chartered Institute of Purchasing and Supply (CIPS).

The construction purchasing managers’ index (PMI) was 49.7 in March, up from 49.5 in February (a score of under 50 marks a contraction). It was the first back-to-back contraction since August 2016 reflecting a period of ‘subdued underlying demand’.

Commercial construction – building for the private sector – performed worst with survey respondents citing Brexit uncertainty and a lack of confidence in the domestic economy as the reasons businesses have stopped spending on new facilities. Furthermore the long time frames involved in planning and construction of commercial buildings has meant more consideration being given to long term economic forecasts before work is even commissioned. The continuing economic uncertainty has resulted in many projects being delayed. In addition, the sector reports strong competition for the contracts that are available.

Concerns about the impact of Brexit on supply of materials, and the potential for extended delivery leadtimes, has led to stockpiling of materials during March which is now also causing storage issues and restricting cash flow for constructors which could have long term consequences.

The Construction industry is particularly inter-connected in terms of suppliers, contractors and sub-contractors and so the impact of restricted cash flow which may cause late payments, and even insolvency, could be significant and its repercussions felt throughout the supply chain.

Residential construction, however, bucked the trend and saw the strongest upturn so far in 2019 as demand for house building in the north and Midlands continued to grow as a result of Government Help-to-Buy schemes which offset falling demand in London and the southeast. However, the cost of goods increased as a result of the Brexit hit pound and a shortage of products was recorded as stockpiling gathers pace.

Some experts predict the sector is well placed once the current uncertainty is resolved given that companies are holding cash ready for investment whist Government is investing in infrastructure projects and is committed to continuing to assist domestic house purchasers.

ReSolve has expertise in this sector which enables us to achieve the best possible outcome for the benefit of the construction business experiencing difficulties. Our partner-backed investment fund gives us the flexibility to make decisions quickly and efficiently, enabling clients to respond rapidly to their commercial situation and facilitate their desired outcomes.

If anyone in the construction sector is experiencing difficulties and would like to discuss options, without charge or obligation, please contact us.

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