UK market intelligence - a bumpy road ahead

Estimates of gross domestic product (GDP) suggest the UK experienced relatively robust growth in the second quarter of 2016 - appreciating by 0.7 percent. This is now the fourteenth consecutive quarter of growth, signifying the UK economy remained on a sound footing amid the volatility in the build up to the referendum in June.

This, however, is pre Brexit data. Initial forecasts provided by the International Monetary Fund (IMF) predict that UK growth could be 1.7 percent in 2016 and 1.3 percent in 2017 on the basis of “limited” repercussions from leaving the EU and a swift bounce back from initial effects. Recent industry data and sentiment indicators lend a hand to this view.

Conversely, the European Commission predicts - in its worst case scenario - prolonged market volatility and dramatically reduced investment. In this situation the in 2016 and 2.6 percent in 2017. Quite simply the UK market is volatile and hard to predict until we know more about what Brexit will mean and when it will impact.

Whatever the short, medium and long term constraints borne by the UK’s decision to leave the EU, construction will have a significant part to play and the extent of this will be determined when the wider market settles.

Currently, activity in the London real estate market remains strong, and we are seeing the regions benefiting from continued confidence with developers investing in the regions buoyed by the prospects of long term infrastructure investment.

As with all volatile markets, capacity issues prevail across the market, especially in key trades and systems, including curtain walling with contractors being increasingly selective by focusing on live projects rather than bidding.

Year Building Infrastucture
2017 2.40% 4.30%
2018 2.90% 4.00%
2019 3.40% 4.10%
2020 3.50% 4.50%
UK economic data
Turner & Townsend tender price index

Key indicators

Materials: A rebound in input costs has seen material costs rise over the past few months influenced by a weaker value of sterling.

Preliminaries: Levels can vary by size of scheme and location, but on the whole are fairly constant over the past three months.

Overheads and profits: The upward trend continues year on year, however, differences between Q1 and Q2 are marginal.

Labour: Shortages in the availability of skilled labour persists and difficulties in recruitment of quality staff continues to be a problem.

Construction by numbers

  • Construction employment improved in Q2 2016, increasing by 2 percent over the past three months. Employment also rose on the year, increasing by 5.4 percent.
  • Vacancy statistics fell on the quarter and the year as of the second quarter of 2016 by 1 percent and 21 percent respectively citing a reduction in construction employment opportunities.
  • Total construction new orders decreased by 1.2 percent on both the quarter and year as of the first quarter of 2016. Private housing suffered the worst contraction on the quarter, reducing by 17.2 percent whilst infrastructure grew by 27.4 percent.
  • Total new company insolvencies jumped sharply in Q1 2016 from Q4 2014 by 19 percent on the year although a slight reduction of 1.2 percent was evidenced on the year.
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For further information, contact:

Kristoffer Hudson
Economic Analyst

t: +44 (0)113 258 4400
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