Sitting in the spring sunshine we have all but forgotten the cold arctic blasts that swept the country in the first three months of the year. They certainly had an impact on construction and I think most will agree that 2018 got off to a slow start.
The Office of National Statistics (ONS) have already revised their figures for the quarter up by 0.5 percentage points on their initial estimate but they still show that overall output fell by 2.7% on the previous quarter. Even private house building, which has long been the construction industry’s star performer saw the number of new house registrations in Q1 fall by 14% over the same period last year.
However, the bigger picture is not all doom and gloom. The ONS statement also points out that construction output reached a record high in the final two months of 2017, and despite this quarter’s decrease output remains 22.7% above the sector’s low point of April 2013.
House starts also picked up in April, with the IHS Markit/CIPS UK Construction Purchasing Managers’ Index showing residential work growing at is strongest rate since May 2017, with activity resuming as soon as the March snows melted.
The Federation of Master Builders’ (FMB) State of Trade Survey for Q1 2018 reported workloads for SME builders continued to grow slightly, albeit at a slower rate than for the previous quarter. Nonetheless the FMB survey has now recorded five years of continuous growth.
However, increased material prices coupled with extended lead times remains the elephant in the room as far as SME builders are concerned. While some of the claimed lead times we have seen quoted for bricks in both the trade and national media are unlikely to stand up to robust investigation, merchants will be only too aware of the pressure on both prices and availability for imported timber, certain brick types and roof tiles. Despite this, FMB members continue to predict rising workloads in Q2, which is positive news for merchants.
More positives can be taken from the annual Sunday Times BDO Profit Track 100, the league table which tracks Britain’s private companies with the fastest-growing profits. 25 of the top 100 companies are involved in construction and house building.
To sum up, we are not writing off 2018 based on a relatively poor first quarter. We may not see the market grow at the same levels as 2017, but we remain confident that it will continue to grow.
John Newcomb is CEO of the Builders Merchants Federation