Following the release of today’s Construction PMI figures, Phil Harris, Director at BLP Insurance, comments on how residential housing is boosting the construction industry while commercial projects are likely to dampen overall sector growth in future:

“The unchanged pace of construction growth is unsurprising as new developments, previously delayed by the bad weather, continue to come on stream. However there remains a tremendous amount of uncertainty in the sector, exacerbated by extended material lead times which are increasing costs and delaying the build programme. Skills shortages remain a critical issue, and although there’s extensive discussion on how to address this, a solution is still a long way off.

“Businesses with exposure to Carillion are also still feeling the repercussions of the collapsed construction giant, while those that avoided any impact may still worry about exposure to a similar situation occurring elsewhere. The well-publicised increasing  debt levels of outsourcing companies with construction arms will have done little to ease the sense of nervousness.

“The strength of the construction industry at present lies in housing, with commercial activity lagging behind. In the housing sector the fundamentals are still strong; demand for new homes is high, supported by consumer confidence and a low interest rate.

“Although May was a stronger month for commercial activity, the sector remains prone to being buffeted by the political outlook because it lacks the domestic growth pressure prevalent in the housing market. Office space demand in London is declining, retailers continue to hit the headlines with store closures, and while hotels and leisure are proving resilient, overall the sector is not booming.”

 

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