The UK’s Construction Sector Weathers Brexit Storm

Published by GlobalX on Feb 12, 2020

The construction sector remains an integral cog in the property market and one that should be nurtured through any difficult times.

Unfortunately, Brexit and sustained political uncertainty contributed to reduced market confidence which put a strain on existing building projects and the pause button on scheduled developments in many parts of the UK.

However, now that the UK has made a final political decision and the government has the numbers to make parliamentary decisions, is the sector likely to improve?

The Difficult 2019 Contraction

In all likelihood, 2020 will remain a flat environment in terms of construction sector growth as developers and builders wade through the residual quagmire left over from 2019.

In November, UK construction work declined for the sixth consecutive month, signalling the lowest output levels since the financial crisis in 2009.

According to the IGS Markit/CIPS UK Construction Total Activity Index, October’s rating of 44.2 remained considerably below the neutral index figure of 50.

The Office for National Statistics also echoed this difficult sentiment by highlighting October’s construction output as the longest period of decline since 2013.

Overall, construction output fell by 2.3% with new work falling by 3.6% and the total UK construction value contracted from £13.22 billion to £13.18 billion.

The Departing Clouds

Fortunately, the latest figures suggest that confidence is returning, and output is increasing.

November’s output figures suggest that the 1.9% increase in all UK activity marked the largest monthly growth rate since January 2019.

Whilst new social housing and infrastructure work meant that all new work had increased by 2.4% in November, private residential new work fell by 6.1% with developers reluctant to commit at that time.

It will be interesting to see if the sector activity continues an upward trajectory in 2020, especially as sector sentiment improves.

Almost half (43%) of construction sector stakeholders now feel as though their business will grow in 2020 according to a recent survey from Huthwaite.

Over a quarter of respondents cited the definite exit from the EU at the end of January as the catalyst for rejuvenated confidence in the sector that will lead to improved productivity in 2020.

Given the government’s pledge to build 1 million new homes over the next five years, the residential sector at least could be set to return to post Brexit levels sooner rather than later.

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