UK market intelligence report, autumn 2017

The long-term impact of Brexit on the construction sector remains unclear and much depends on whether a two-year transitional deal is struck with the European Union.

Construction is now in a technical recession after output fell 0.5 percent in the second quarter of 2017 and decreased further by 0.9 percent in the third quarter. Market PMI data confirms this view, with UK construction companies signalling that business conditions remained subdued during October. Output growth was largely confined to housebuilding, which partly offset lower volumes of civil engineering and commercial activity. Industry confidence regarding the 12-month outlook for the sector was highlighted as the weakest since December 2012.

As the market cools and demand for construction softens, increasing competition between contractors is driving down tender pricing. In turn, this has resulted in reduced margins meaning that insolvencies are on the rise. In this UK market intelligence (UKMI) report, we provide a focus on insolvency and the steps that clients should take to mitigate risk across their supply chains.

  • Against the backdrop of ongoing Brexit negotiations, uncertainty is impacting investor confidence to build. Consequently, contractors are reporting a cooling market and reduced order books.
  • Weakened market confidence and reduced levels of secured future work are increasing competition and forcing the industry to revise down tender price expectations.
  • Reduced demand, increased competition and lower tender prices all conspired to further tighten tier one contractor margins in the third quarter of 2017.
  • Pre-Brexit economic uncertainty is fuelling a rise in construction insolvencies and liquidations as contractors tighten margins and take greater risks.

More information

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If you would like to discuss the UK market intelligence report or any of the topics covered, please contact Economist, Kristoffer Hudson or your usual Turner & Townsend contact.

For further information contact:

Kristoffer Hudson
Economic Analyst

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