The construction industry is facing a slowdown in growth in the aftermath of the EU referendum vote, according to new figures.
The latest Construction Skills Network report from the CITB reveals that construction’s expected output over the next five years now averages 2% per annum – down from 2.5% in the forecast from January this year.
The remainder of 2016 and 2017 however, will see a period of limited growth and potentially a small contraction of -0.2%.
“Our new figures reflect the increased uncertainty in a Brexit-facing world,” said Stephen Radley, Director of Policy at CITB. “While construction’s slowdown cannot be solely attributed to the result of the vote, it has certainly intensified and hastened any decline in growth.”
While the average output in construction is 2%, there is a varied picture across the UK. Wales’ average growth rate remains well above average at 5.7% and in England, the South West (2.8%) and North West (2.2%) present the strongest regional outlook.
Scotland (-0.6%), the North East of England (-0.1%) and the East Midlands (-0.2%) are all predicted to contract.
The biggest shift in the forecast is for the Greater London region where growth has fallen two percentage points from 3.5% in January’s forecast to 1.5%.
“The warning signs were always there,” said UCATT Acting General Secretary, Brian Rye. “Prior to the referendum, anyone with an ounce of common sense was saying if you place a country into political and economic turmoil and then sever it from its main trading market, that trouble would not be too far away. The construction industry is a European and global industry – fact.
“This trade union always said the impact of Brexit on the UK’s construction industry would be detrimental and we are now seeing the first signs only a few months after the vote to leave the EU.”
The sector’s employment growth rate has also been revised down. The annual UK-wide recruitment requirement has fallen by a third, from 232,000 to 157,000.
Over the next five years, the industry will now need 25,350 new workers every year in England, 3,540 in Wales, 1,810 in Scotland and 650 in Northern Ireland.
Meanwhile, the The Markit/REC Report on Jobs reported that the availability of permanent candidates continued to decline in October, and at a steeper rate than in September. The availability of temporary/contract staff fell at the softest rate in four months.
“This is a great place to be but there are real threats coming over the hill,” said REC Chief Executive Kevin Green. “Candidate availability has been falling for three and a half years. There are more vacancies than there are people to fill them in many sectors, including engineering, construction and healthcare.”
The supply of candidates for permanent roles in the capital fell for the forty-first consecutive month in October, according to The Markit/REC Report. Furthermore, the rate of contraction accelerated since September and was sharp overall.
“The government urgently needs to outline a strategy to address employability skills within UK education and promote apprenticeships and other routes into work,” said Green. “We also need immigration policies that reflect immediate labour market needs. Imposing new restrictions on people coming from abroad to fill vacancies will impact businesses’ ability to meet demand as well as the delivery of public services.
“We need Britain to remain open for business. We can’t afford to see businesses relocate overseas, taking jobs with them and leaving us poorer as a nation.”
Infrastructure output is a key driver of the forecast overall, with Hinkley Point C providing a particular boost to the figures, according to the CIBT. But even this leading subsector is likely to contract more than previously anticipated.
This is largely due to a pause in road building, and weak performance in the electricity sub sector for the first time in many years. While further project cancellations are not expected, slippage may also affect the forecast for the next five years.
The outcome of the referendum vote is expected to have the biggest impact on the private commercial sector where output is expected to fall from 3.4% to 1%.
“Recently trading conditions have become more difficult, and margins are being further squeezed,” said Radley. “But Brexit has introduced an unprecedented number of unknowns and construction is beginning to feel the repercussions.”
This sector relies heavily on overseas investors in the London market. The capital’s office development cycle had probably already peaked but the referendum result is likely to sharpen the downturn.
Private sector housebuilding is expected to hold up well, with projected growth at 1.6%, down just 0.3% on the previous forecast.
Work in the repair and maintenance sector, however, is down from 1.2% to 0.7%, as a result of limited disposable household income.
“While on the whole the outlook has worsened, we do need to keep some perspective,” said Stephen Radley, Director of Policy at CITB. “The economy is bearing up reasonably well in the wake of the uncertainty and construction has a healthy programme of major projects and infrastructure works in the pipeline. Projects such as Hinkley, Wylfa and HS2 will undoubtedly buoy up the sector in the medium term.
“However, delays and uncertainty over investment decisions and access to migrant labour will likely intensify as Brexit nears. While employers’ main focus in the short term will be to weather the storm, it’s also important that they equip their workforce with the right skills for the challenges ahead.”