Growth in construction UK: the current industry climate 2016
Builders and developers are encouraged to make the most of a period of continued growth in the construction sector. According to the Federation of Master Builders (FMB) ‘State of Trade Survey’ the first three months of 2016 have continued the trend of UK SME building firms experiencing higher workloads with an increase of 4% on the previous quarter*.
This evidence is supported by the Construction Products Association (CPA) who note the twelfth consecutive month of increased construction activity across the supply chain**. The CPA’s report does come with a warning that uncertainty over the coming months may cause a drop as Rebecca Larkin, Senior Economist at the CPA claims:
“After the slowdown at the end of last year, firms throughout the construction industry experienced a stronger opening quarter in 2016. In spite of this, the clear theme for Q2 is uncertainty, with the main contractors reporting lower orders in all sectors as projects are paused or postponed ahead of the EU referendum in June”**.
In this article HBXL Professional Services will look at the current growth in construction activity, the effect on workloads, prices, employment and predictions for the future of the construction industry.
Growth in construction Q1 2016
As mentioned, there has been continued growth in overall construction activity for the past 12 quarters and if we look at the Residential construction sector specifically, builders and developers will be pleased to see that both private new build and private RM&I have seen an increase in activity in the first quarter of 2016* with private new seeing the biggest rise of 20 percentage points*. Private RM&I is at a similar level at +15 percentage points* 7*.
The total residential workload increased by +22* percentage points with only one of four sectors showing a decrease of -7* for the Social new sector.
Construction industry activity predicted trends
Looking ahead, predicted activity is set to increase again with 38%* of the building firms surveyed forecasting higher workloads up from 22%* in the previous quarter.
It’s worth noting that output prices, wages, salaries and material costs, all are expected to rise over the next six months on top of the already higher prices and costs mentioned. It is really important to stay on top of price rises, especially when estimating for future jobs. This is why HBXL Estimating Service uses live updated Merchant prices and can also account for the rise in costs with inflation calculators to help our builders protect their profits.
Workload predictions for construction workers
Overall residential sector SME building firms are predicting their workloads are expecting a further increase with 35%* of respondents predicting higher workloads as opposed to only 10%* predicting a decrease.
What does the rise in construction activity mean for building firms?
The simple answer is that building firms need to make the most of a period of high demand but be weary of over extending themselves given rising costs and market uncertainty due to the EU referendum in June and the repercussions of the outcome.
This means making sure companies are taking on the right work, monitoring costs/inflation, protecting margins and delivering a good quality service. Accurate estimates from the beginning and the complete package of management documents are two sure fire ways to stick to budget and protect profit margins which is vital to making the most of the growth in construction industry. Give us a call today on 0117 9167894.