Brexit To Weigh on UK Private Construction

Growth in the UK’s construction sector was subdued in the third quarter of this year, something which is expected to continue on until 2017 when mixed fortunes will favour different sub-sectors, two separate reports show.

The Royal Institution of Chartered Surveyors (RICS) latest construction survey shows that private housing construction provided the biggest boost to overall construction activity in the third quarter of this year, with infrastructure lagging behind. Survey respondents also said they expect workloads to increase over the next 12 months.

However, while there are signs of optimism among construction professionals, it remains below levels seen prior to the Q2 survey, as Brexit-related uncertainty continues to weigh on expectations.

“The picture painted by the Q3 survey is one of subdued growth, and although expectations have improved following the immediate shock of the vote to leave the EU, anecdotal evidence from respondents suggests that much uncertainty still remains on the outlook for the year ahead,” said the RICS chief economist Simon Rubinsohn.

Looking further ahead, a separate report from the Construction Products Association (CPA) is forecasting construction activity in the residential and commercial sectors to flatten in the next two years during Brexit negotiations.

While infrastructure projects should increase over the period, residential housing construction is eventually expected to decline by 2% in 2018, while retail construction projects are seen falling this year, in 2017 and in 2018.

“Surveys across the industry highlight that activity in the construction sector has been sustained post-referendum, primarily based upon work on projects that were signed in the 12-18 months before the referendum,” said Noble Francis, the CPA’s Economics Director. “Looking forward, projects in the pipeline mean that construction activity is likely to continue throughout the rest of 2016 and the first half of 2017.”

Mr. Francis goes on to say, however, that come the second half of 2017, the construction sector landscape is expected to change. Government support and financial backing means infrastructure projects will likely continue to provide work and produce new, much needed facilities.

For the private sector, however, investment is expected to fall and projects to be thinner on the ground as Brexit negotiation uncertainty leads to caution over how beneficial UK investment might be, once the UK formally leaves the EU.

While there’s little that can be done to banish the growing uncertainty over the UK’s future, the Government is in a position to reassure that the construction sector remains a crucial part of the country’s economic expansion.

“With an upcoming Autumn Statement, it is vital that the Chancellor focuses on reducing uncertainty for the private sector, sustaining the housing sector and ensuring delivery of education construction and major infrastructure projects already in the pipeline,” the CPA’s Francis said.

The UK is facing a potentially difficult few years and the Government must do all it can to reassure businesses, consumers and industry. It must work towards helping to provide the homes and public sector facilities, including schools and transport hubs that are very much needed, regardless of what the outcome of leaving the EU eventually entails.