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Warning signs for UK’s construction industry as output drops sharply

Snowy weather, rising costs and uncertainty relating to Brexit are to blame for the sharp drop in construction output, the Federation of Master Builders (FMB) has said in response to the latest PMI data.

The March 2018 PMI data revealed a fall from 51.4 in February to 47.0 in March, against the neutral reading of 50.0. March 2018’s figure was weaker than the average 52.3 of 2017.

Commenting on the results, Brian Berry, Chief Executive of the FMB, said: “The latest PMI data shows the fastest drop in construction activity since July 2016. The unusually cold and snowy weather experienced across the UK last month is partly to blame for this set-back. The cold snap impacted on a broad array of construction projects, including house building, domestic refurbishment and large civil engineering projects. Many small builders across the country were forced to close sites for more than a week and some employers reported that it was too cold to lay bricks.”

Berry continued: “Alongside the snow, the cost of doing business is rising for the UK’s construction firms. Wages and salaries are all rocketing because of the ever worsening skills shortages in construction. What’s more, material prices have been rising steadily since the depreciation of sterling following the EU referendum. Increased prices for metals and insulation in particular were noted in March. We expect material prices to continue to cause a headache for the construction industry with recent research from the FMB showing that 87% of builders believe that material prices will rise in the next six months.”

Berry concluded: “More broadly, the future is still looking incredibly uncertain for the UK construction sector. We still don’t know what the post-Brexit immigration system will look like and given that businesses need to plan ahead, this could also be putting a brake on growth in the construction sector. This is especially the case for construction – our sector is heavily reliant on EU tradespeople with more than 8% of construction workers hailing from the EU. In London, this rises to one third. The Government must take stock of today’s results and redouble its efforts to provide post-Brexit clarity to businesses. We need to know what we can expect from the new immigration system – we need to know what will replace free movement of people.”