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October 2017

UK construction sector slips in September – what does it mean and what happens next?

Published: Tuesday 03 October 2017

By Rachael Kinsella
The latest IHS Markit/CIPS Construction Purchasing Managers’ Index (PMI) reveals a difficult time for the construction industry throughout September 2017. The index dropped below the all-important indicator of 50 to 48.1 for September, denoting a steep decline in construction output and new orders for the month of September.

New work orders down

Survey respondents saw an overall lack of confidence and decreased risk appetite as the key reasons for falling new business, particularly in commercial construction and civil engineering. Political, market and economic uncertainty have led to fewer new infrastructure and commercial development projects, as well as longer budget approval lead times, as project instigators take a more risk averse approach in the face of market ambiguity.

House building increases, slowly

Once again, house building is the only area of growth in the sector, although this has slowed to the lowest for six months over concerns about future market conditions.

Higher costs

Input costs are on the rise, as imported materials cost more with a weaker Pound. This has continued to increase inflationary pressure on the sector, which now sits at a seven month high. These cost increases are being felt right across the supply chain.
David Johnson, founding director at Halo Financial, observed,
“Market volatility and economic and political uncertainty have really taken their toll on the UK’s construction sector this month. The effects of a weaker Sterling have put pressure on suppliers and construction workers involved in current projects and the number of new orders. Sterling has responded by falling lower, amid concerns about these results as an indicator of UK economic health.”

“With continued uncertainty ahead, businesses in the sector need to assess potential risks now and in the future and look to address these with the right strategy. Taking into account currency exposure and its effects on profit margins is key in an uncertain economy; there are tools that can be used to minimise this and plan for future shocks.”

“These results have unfortunately further increased market uncertainty, as traders and investors worry about the state of the UK economy and the effects of Brexit.”

Brendan Sharkey, partner and head of construction and real estate at MHA MacIntyre Hudson, commented, “Economic uncertainty means less appetite for new projects and a longer and more difficult process for financing them, particularly in the commercial sector and for large-scale infrastructure projects. The sector could really do with a boost in confidence in the form of one or two large scale projects that will capture both governmental and public imaginations.”

“While there is less demand than there was around six months ago – again, owing to economic and political uncertainty – house building at the smaller end of the spectrum is still growing, albeit at a slower pace, and there is certainly work there for the immediate and near future as long as government support for projects such as Help to Buy continues.”

About Halo Financial

Halo Financial is a leading UK foreign exchange brokerage, offering a comprehensive range of services to individuals and businesses since its inception in 2005. The business prides itself on offering a flexible and personalised approach for each of its clients, simplifying the seemingly complex foreign exchange market to maximise savings in currency transactions, protect against currency risk and make money go further.

Staffed by qualified technical analysts, the company is authorised by the Financial Conduct Authority and HM Revenue and Customs.

“Excellent”, “Reliable”, “Professional”, “Knowledgeable”, and “Helpful”– just some of the great feedback received as a Gold Trusted Service Provider for Feefo.com. The team at Halo are proud that customers rate their services so highly and are happy to recommend to others. The company is always striving to provide the best possible service and to innovate services and products in line with customers’ ever-evolving needs.

Halo Financial won Best Customer Focus category in the 2016 Best Business Awards; received OPP Gold for Best Supporting Service; the Gold Award for Financial Support and Innovation from Relocate Magazine, Commendations in the 2016 and 2017 Moneyfacts Awards and has 5 out 5 Star Customer Gold Merchant Status via independent review website, Feefo.com, winning their Gold Trusted Service award. 

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news