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Sun November 18 2018

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High input costs and Brexit fuel contractors’ fears

17 Oct UK contractors’ order books have filled up considerably this financial year, but high input costs are fuelling fears of a subdued market ahead, according to the latest UK market intelligence report from Turner & Townsend.

Order books for the current financial year surged by 23.4 percentage points during the second quarter, while those for 2019-20 are now 17.5 percentage points fuller than they were in the first quarter. This is the fastest pace of quarterly growth since the survey’s inception.

However, contractors expect the cost of a representative basket of construction materials to rise by 5.3% in the coming year.

Meanwhile, Dublin’s construction market is booming, with bullish sentiment and strong client demand. Tender prices set to rise by 6.3% in 2018, well over double 2.5% rate forecast for London.  Nearly two thirds of contractors in Dublin report the market is getting warmer.

The gulf in construction fortunes between the two cities is most stark in terms of market sentiment.  Nearly two thirds (63.6%) of contractors in Dublin report that their market is improving and getting warmer compared to just 21.1% respondents in London; 26.8 percent of contractors expect to see the London market cool.

Paul Connolly, UK managing director of cost management at Turner & Townsend, said: “While there have been some high-profile examples of financial sector giants swapping the City for the Liffey, for now the exodus remains more threat than reality. Clearly it is incorrect to suggest that the interplay between the two cities is a zero-sum game, and that Dublin’s market is heating up in direct inverse proportion to London’s cooling.

“However, a surge in relocation interest has undoubtedly turbo-charged Dublin’s construction market, and it now risks overheating with the city facing the prospect of acute skills shortages and rapid price inflation. While Brexit itself is likely to impact on both sides of the Irish Sea, for now the uncertainty over the nature of the UK departure from the EU is taking a far greater toll in London than in Dublin.”

He added that the most obvious issue to be confronted is supply chain strain. “Clients must remain vigilant and in practical terms, this means re-running credit checks and challenging suppliers on their ability to continue delivering, while also seeking to understand and allay their concerns.”

MPU

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