Trade body warns that rise in construction output ‘masks falling optimism’ within sector

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THE Federation of Master Builders (FMB) has warned that the highest rise in UK construction output since August 2021 ‘masks’ falling optimism.

The trade body was responding to the latest construction PMI data.

Brian Berry, FMB chief executive, said, “Construction output has been sustained during March through the buoyancy of commercial projects, but the latest PMI data makes clear that growth in the repair, maintenance, and improvement (RMI) and housebuilding sectors has stalled. For smaller construction firms, these projects represent the bread and butter for their businesses.

“Faced with rampant inflationary pressures and significant uncertainty regarding the economic impact of the war in Ukraine, it’s clear that these smaller building firms look set to suffer at a time when consumers are tightening their belts.

“After a testing period during the pandemic and with business optimism now at a 17-month low, the Government should take a proactive approach to reduce the difficulties. A measure that would act as a boost for builders and reduce long terms costs for consumers would be the introduction of a National Retrofit Strategy. This would create demand for retrofit projects, that local builders will then deliver and cut energy bills for customers.”

Joe Sullivan, partner at MHA, believes the ‘relentless’ housing boom in the UK and easing of supply chain issues are driving ‘cautious optimism’ across the sector, despite the impact of inflation and the Ukraine crisis.

He explained, “The UK housing sector’s continued growth in March has underpinned another fine month for the construction industry. Demand for new build homes shows no sign of abating, fuelled by mortgages remaining comparatively cheap (despite the recent base rate increase from the Bank of England). While material and labour shortages could prove potential bumps in the road ahead, the outlook for the residential sector remains very rosy.

“Sector confidence has also been boosted by some easing of supply chain issues so far this year, however the ongoing war in Ukraine is expected to put this in jeopardy. The true impact of the war and resulting sanctions on Russia will take time to materialise and as such, certain supply chains must swiftly pivot towards other sources for their materials. The Forest Stewardship Council (FSC)’s decision to remove certification of timber originating from Russia and Belarus is a prime example of the war’s impact on the sector, with architects and contractors set to face obstacles in delivering jobs on time and to specification.”

Stephen Marcos Jones, CEO of the Association for Consultancy and Engineering (ACE), said that despite the challenges resulting from inflation and the crisis in Ukraine, it is ‘encouraging’ to see that construction output remains positive.

He added, “In our recent roundtable with ACE member representatives and officials from BEIS on the impact of Ukraine, we agreed that collaboration, open dialogue and transparency – both across the supply chain and between our sector and government – will ensure we are in the strongest position possible to manage this uncertainty.

“While our sector is currently less severely affected than other areas of construction, inflation impacts all businesses. In this regard, the chancellor’s Spring Statement was a missed opportunity for more targeted business support to not only help business to manage the weeks and months ahead, but also to boost optimism which is understandably subdued at the moment.”