President's Column November/December 2019

22/11/2019

Category: President's Column

What's going on in the construction sector at the moment? On one hand, we have the statistics implying it's all doom and gloom, and on the other hand, many of my customers are saying they've never been busier. How do we reconcile these conflicting sentiments, and what do they mean for us all?

The IHS Markit / CIPS UK Construction PMI has been in the doldrums for months, sitting well below the 50 break-even point. Their latest data release for October was 44.2, following on from September's weak 43.3. Experian is expecting a flat year for construction this year, up 1.2% and the ONS new orders data for quarter 2 was 13.3% down, more than reversing the gains we saw in the first quarter of this year.

But when I speak to my customers, they all say they're flat out and never been busier tendering. So what's the story?

We all know that the large London commercial market remains soft; in the October UK Construction PMI survey, commercial activity fell for the 10th month running. However, I spend a lot of time on the road, and when I visit big cities like Manchester and Birmingham I see growth, commitment and a lot of big projects.

Cost, as usual, is at the fore and this is likely to account for the busy feel around tendering. When customers and main contractors are needing to drive costs down, it can often feel like the market is busy, both for main contractors and sub-contractors. But there's always a downside, with unrealistic cost models creating financial instability in the sector and driving down quality. It also means that the cowboys are awarded jobs that they're not properly qualified for, and the project cost and schedule are never met anyway. It's a real false economy.

We're also continuing to see a high level of insolvencies throughout the construction supply chain. And in response, many of the main contractors have reshaped, re-positioned and restructured to meet what they think conditions will be in the short to medium term.

Of course, it is prudent to take note of the conflicting signals and prepare for a downturn in the short term. But it is just as important to look at the long term and prepare for a new environment in construction. One with different contracting models, reshaped clients and updated methods of construction.

BCSA is helping its members on both fronts - providing advice and lobbying on the short-term commercial issues they are facing, while re-positioning steel, the original offsite framing material, for the inevitable longer term changes to the construction sector.

Tim Outteridge, BCSA President

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