Reasons for optimism?

22 July, 2015
by: Cripps Pemberton Greenish

It is summer. July has started with some of the hottest temperatures we have seen for years and we are promised more to come. Henley, Wimbledon and The Ashes all provide welcome and colourful distractions. Cold Pimms or warm beer, strawberries or barbeques, park or beach, whatever your taste, relax and enjoy.

Those of us involved in construction ought to be optimistic (well maybe not in the case of the cricket). In the early part of the year, economic activity in the construction sector was falling back. That was no doubt in part due to the inevitable slowdown that preceded the general election. Over the last quarter, however, economic activity in construction has bounced back. June saw the fastest acceleration in four months. With the election out of the way, and a relatively decisive result, some confidence has returned. Job creation in the sector was also sharply on the rise.

Markit, who compile the Puchasing Managers Index, said that respondents to its latest survey were feeling buoyant about the outlook for the economy. ‘Anecdotal evidence’ it said ‘linked greater new business volumes to rising client confidence and improving business conditions’.

Commercial and civil engineering operations are contributors but, once again, housebuilding is leading the charge. Persimmon, one of the country’s largest housebuilders, saw output rise 7% in the first half of the year. Total revenues were up 12% at £1.34bn.

Despite the sunny outlook, there are a few clouds on the horizon. Nationwide has reported an unexpected fall in house prices of 0.2% in June. That equates to an annual rate of growth at a two year low of 3.3% compared to 4.6% in May.

Labour and supply shortages, skills gaps and sub-contractor availability remain persistent threats. Input prices continue to rise. So whilst an increased level of activity is to be welcomed, pressure on margins looks set to remain for some time yet.

Enjoy the sunshine whilst it lasts.