UK construction falters in wake of Brexit

Richard Furlong - City Surveys Group

Home » UK construction falters in wake of Brexit

Published: 5th August 2016

This Article was Written by: Richard Furlong - City Surveys Group

  


Reports from around the UK show an interruption to construction orders since the Brexit vote, which saw Britons vote to leave the EU in the referendum.

The building sector was on high alert heading into the EU Referendum, and since the results of the vote became clear, many organisations throughout the industry have been working to keep track of the immediate impact of the Leave vote.

Among them are the Builders’ Conference, which compiles monthly data on new construction contracts, and has published figures for July 2016 that indicate a steep decline in new orders during the month, both compared with June and with the same point in 2015.

The July 2016 statistics show a 15% drop in contract awards month-on-month in terms of number of orders, and an even more pronounced 35% fall by value compared with June alone. Over the previous 12 months, the decline in value is 55%, which Builders’ Conference chief executive Neil Edwards called “staggering”.

“As the industry winds down for its summer holidays, many among its ranks will not have the benefit of some hard-earned rest and recuperation. Instead, they will be worrying just what they will be coming back to when that holiday is over,” he said.

Looking around the UK’s individual member countries, the Federation of Master Builders (FMB) has issued warnings for several parts of the union, including “real concerns” about the construction industry in Scotland, which voted 62% in favour of remaining in the EU.

In the second quarter of 2016 leading up to the Brexit vote, Scottish construction was booming, with the market at its most bullish since the onset of the financial crisis in 2007, but the EU Referendum outcome may put a halt to that positivity.

Gordon Nelson, director of FMB Scotland, said: “The referendum result was not widely foreseen and will undoubtedly impact upon business and consumer sentiment over the second half of this year.

“Scottish construction SMEs are in a much stronger place to deal with any uncertainty generated by Brexit than they were a few years ago, but will be concerned that the hard-earned gains they’ve made will be jeopardised by retrenching consumers who may put off making significant investments in the short term.”

He called on the Scottish Government to provide strong leadership and a level playing field to Scottish construction firms of all sizes – including by making sure it uses fairer procurement policies for public sector contracts, in light of a decline in SMEs working on such projects in recent years.

The FMB also had warnings for Wales, where the overall vote to Leave was among the most surprising regional outcomes in the referendum.

FMB Cymru reported that workloads again were up in the second quarter of the year, ahead of the referendum, but that in the days immediately before the vote, enquiries to Welsh construction SMEs declined.

Ifan Glyn, director of FMB Cymru, noted that seven of the preceding eight quarters saw higher confidence among consumers and businesses in the Welsh construction sector – but called the drop in enquiries “ominous” even before the outcome of the vote was known.

And in Northern Ireland, the only part of the UK with a land border, currency effects were singled out as a potential factor in influencing the way construction firms look for work.

With the Republic of Ireland part of the eurozone and the value of the pound plummeting in relative terms, FMB NI suggested that more Northern Irish firms might look south of the border for work, as well as using the exchange rate to offset rising materials costs and a shortage of necessary skills in the local workforce.


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