RISING costs and uncertainty relating to Brexit are to blame for the sharp drop in output growth in January 2019, the Federation of Master Builders (FMB) has said in response to the latest Purchasing Managers’ Index data (PMI).
The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager’s Index incorporates survey results provided by construction firms throughout the country.
A reading above fifty suggests the construction sector is expanding, while a reading below fifty suggests the construction sector is in contraction.
The January 2019 PMI data revealed a fall from 52.8 in December to 50.6 in January, against the neutral reading of 50.0. January data pointed to a loss of momentum for the UK construction sector, with business activity growth grinding to its weakest for ten months.
All three categories of construction output recorded weaker trends than those reported in December.
Residential work was the strongest performing area, although the latest expansion was only modest and the slowest seen since March 2018. Civil engineering activity increased marginally, with the rate of growth much softer than December’s 19-month high.
Commercial work was the weakest performing area of construction output in January. Latest data indicated a decline in work on commercial construction projects for the first time in ten months. Anecdotal evidence suggested that Brexit-related anxiety and associated concerns about the domestic economic outlook continued to weigh on client demand.
New business growth eased to an eight-month low in January.
Construction firms widely commented on softer demand conditions and longer sales conversion times, reflecting a wait-and-see approach to spending by clients. Concerns about the near-term outlook for new projects resulted in more cautious staff hiring policies at the start of 2019. The latest survey pointed to the slowest rise in employment numbers since July 2016.
However, construction firms remain positive about the outlook for business activity in 2019. Around 41% of the survey panel anticipate a rise in output, while only 16% forecast a fall.
Optimism had, however, fallen month on month. Large-scale civil engineering projects were cited as a key source of optimism, while Brexit uncertainty was the most commonly cited concern.
Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey: “UK construction growth shifted down a gear at the start of 2019, with weaker conditions signalled across all three main categories of activity.
“Commercial work declined for the first time in ten months as concerns about the domestic economic outlook continued to hold back activity.
“The latest survey also revealed a loss of momentum for house building and civil engineering, although these areas of the construction sector at least remained on a modest growth path.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said: “The sector suffered a sharp drop in output growth in January, and the softest rise in purchasing volumes since September 2017, as Brexit continues to hamper progress and dampen client confidence.
“The biggest shock came in the form of job creation which has managed to suffer the slings and arrows of Brexit highs and lows with solid hiring since the referendum result. Employment rose at the slowest rate since July 2016 and with optimism also in short supply, the sector only needs a small nudge to tip it closer to a recession.”
Commenting on the results, Brian Berry Chief Executive of the FMB, said: “The latest PMI data show a slowdown in growth in construction with business activity growth easing to its weakest for ten months. The ongoing political uncertainty is partly to blame for this setback.
“Political uncertainty is the enemy of construction firms that rely on the spending power of homeowners to commission home improvement projects. The UK is set to leave the EU next month, and yet we are still none the wiser about what the future holds. Given these intense headwinds, it should not be surprising that the sector suffered such a sharp decline.”
Mr Berry continued: “Alongside the political uncertainty, the cost of doing business is also rising for construction firms up and down the country. Material prices have been rising steadily since the depreciation of sterling following the EU referendum.
“Looking ahead, material prices are expected 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. What’s more the construction skills crisis means that key trades are extremely difficult to recruit and the upshot of this is rising wages in construction.
“Tradespeople know they can command higher salaries than they did previously as workers are scarce, and this means a squeeze in margins for firms. This will only worsen if the post-Brexit immigration system that the Government has planned goes ahead.
“If the sector isn’t able to draw upon crucial EU workers of all skill levels, who have so far served to mitigate this shortage, the slowdown of growth will continue.”
MP makes Budget case for support for self-employed and small businesses in Ceredigion
BEN LAKE MP has called on Chancellor Rishi Sunak to extend the government’s financial support package for businesses and self-employed workers in next week’s Budget as many struggle to stay afloat during continued lockdown restrictions.
The Chancellor, Rishi Sunak is to set out the UK Government’s budget on Wednesday 3 March, almost a year since the last Budget on 11 March 2020.
To help businesses and our local high streets over coming months, the Ceredigion MP has called on the Chancellor to extend the lowered rate of VAT at 5% for hospitality and tourism for a year to March 2022 and to extend the business rates relief package.
Mr Lake also called on the Chancellor to retain the furlough scheme for the duration of pandemic restrictions, as recent figures show more than 178,000* in Wales are still receiving government help from the CJRS. He also urged the Chancellor to expand the existing eligibility criteria for the Self-Employed Income Support Scheme in order to offer some help to the many individuals who have not received a penny in Government support thus far.
Ben Lake MP said: “For many businesses and self-employed workers, the financial support government has offered over the last 12 months has been a lifeline. Now, as we are finally starting to see light at the end of the lockdown tunnel, we cannot remove this lifeline prematurely. Extending this help for a little longer, and expanding the criteria to help those that have been excluded thus far, would offer small businesses the support they require to ‘bounce back’ from the pandemic.”
Many businesses who are still not open due to lockdown measures are also now expected to start repaying their Bounce Back Loans. This is despite their situation largely remaining unchanged since they took out the loan, or in some unfortunate instances, worsened as they have not yet been able to trade.
UKHospitality has estimated that the hospitality sector lost around £72 billion in sales in 2020 and faces, frankly, a debt mountain, including £4.2 billion in state-backed loans.
Mr Lake said: “It is important that businesses that took out bounce back loans and CBILS are required to pay only when they are in a position to do so – once they have ‘bounced back’ from the pandemic. Affording such a level of flexibility, and thus preventing avoidable business failures, would protect jobs, the taxpayer’s investment in the recovery, and the integrity of our financial system.
“We remain in the early stages of a vaccine-led recovery, and it is likely that we will have some form of restrictions for many months to come. Having done so much to protect the economy and the workforce, we must not withdraw support prematurely, as to do so would risk throwing away the investment taxpayers have made in the last year, and potentially our economic recovery.”
£3.8m to upgrade local gas network
WALES & WEST UTILITIES says it is continuing its work to upgrade the gas pipes supplying homes and businesses across west Wales and has announced a £3.8 million investment programme for 2021.
The work, which will see 19km of gas pipe upgraded, not only keeps the gas flowing safely today, it also prepares the gas network to transport green gases like hydrogen and biomethane. Converting the existing safe and reliable gas network to run on green gas will help communities across Wales and south west England play their part in a green future and getting the UK to Net Zero.
Rob Long, Wales & West Utilities Chief Operating Officer, said: “While most of the gas network is underground and out of sight, it plays a central role in the daily lives of people across west Wales. Whether it’s heating your home, making the family dinner or having a hot bath, we understand how important it is for your gas supply to be safe and reliable and there when you need it.
“Our investment in local communities is essential to keep the gas flowing to local homes and businesses today, and to make sure the gas network is ready to transport hydrogen and biomethane, so we can all play our part in a green future.
“And it will make sure that we continue to support communities through Coronavirus, keeping the gas flowing so local people are safe and warm.”
Wales & West Utilities look after the pipes that keep the gas flowing to heat the homes and power businesses of 7.5m people across Wales and south west England. They operate the gas emergency service, connect new homes and businesses, and upgrade the gas network so it’s safe today and fit for a green future.
Wales is moving in the right direction to ease coronavirus restrictions
THE NUMBER of coronavirus patients being treated in Welsh hospitals is at the lowest for three months, Wales’ Health Minister Vaughan Gething has revealed at a briefing today (Feb 8).
The R number is below one, it was confirmed – the most recent estimate from SAGE is that R is between 0.7 and 0.9 in Wales.
He also confirmed that the latest figures show the testing positivity rate has fallen in Wales below 10%, which means Wales could soon be moving is from alert level 4 to alert level 3.
Mr Gething said: “There are some encouraging signs that the number of people needing hospital treatment for coronavirus is starting to fall.
“The number of people with confirmed Covid in our hospitals is at the lowest since 8 November and we have also seen a reduction in the number of people with coronavirus needing intensive care.
“Overall, we are seeing cases of coronavirus fall. Monday’s figures show there are around 115 cases of coronavirus per 100,000 people in Wales.
“But this varies widely across Wales.
In Wrexham, rates are above 220 cases per 100,000 people, although this is falling. In Ceredigion, the rate has risen over the last seven days to 56 cases per 100,000 people. “The positivity rate – this is the percentage of tests, which return a positive result every day – is also falling. It now stands at just below 10%.
“This is still high, but it’s a lot lower than the very high rates we were seeing before Christmas, when we had overall rates of more than 650 cases of coronavirus per 100,000 people and a positivity rate of more than 25%.”
BAM communities hesitant to get vaccines
Concerns have been growing in recent weeks about an apparent hesitancy from some people in black, Asian, and minority ethnic (BAME) communities to have the Covid-19 vaccine. Which is why Mr Gething also told the briefing that work was being done to counter some of the misinformation about the vaccine, which is common among some groups and communities.
He said that Welsh Government was closely monitoring vaccine uptake to make sure there are no barriers to take-up.
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