Increased order books for UK contractors haven’t defeated Brexit uncertainty, with high input costs fuelling fears of a subdued and cooling market for the next 12 months, according to the latest quarterly analysis from leading professional services company, Turner & Townsend.
The consultancy’s UK market intelligence report finds that order books have increased by 23.4% in the current financial year (2018-19) while contractors indicate that order books for the next financial year (2019-20) are now 17.5% fuller than they were in Q1.
However, contractors report that input costs remain stubbornly high and the company’s price data reveals that contractors expect the cost of a representative basket of construction materials to rise by 5.3% in the coming year.
The report, which takes the temperature of the industry’s front line, found that in Q2 more than half of the UK contractors surveyed felt the market will continue to cool over the next 12 months.
“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,” said Paul Connolly, UK Managing Director of cost management at Turner & Townsend.
Outside of the UK but less than 300 miles from London, Dublin’s construction market is in the midst of a full-scale boom, with bullish sentiment and strong client demand driving up tender prices at well over double the rate seen in the UK capital.
Surveyed contractors forecast that tender prices in Dublin will rise by an average of 6.3% in 2018, while those in London forecast a modest 2.5% increase.
“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,” added Paul.
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% of respondents in London. 26.8 percent of contractors expect to see the London market cool.
“In challenging markets like London, clients must face down multiple, fast-moving threats with equally agile procurement and project management strategies. 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,” concluded Paul.
