RISING costs and uncertainty relating to Brexit are to blame for the sharp drop in output growth in January 2019, the Federation of Master Builders (FMB) has said in response to the latest Purchasing Managers’ Index data (PMI).
The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager’s Index incorporates survey results provided by construction firms throughout the country.
A reading above fifty suggests the construction sector is expanding, while a reading below fifty suggests the construction sector is in contraction.
The January 2019 PMI data revealed a fall from 52.8 in December to 50.6 in January, against the neutral reading of 50.0. January data pointed to a loss of momentum for the UK construction sector, with business activity growth grinding to its weakest for ten months.
All three categories of construction output recorded weaker trends than those reported in December.
Residential work was the strongest performing area, although the latest expansion was only modest and the slowest seen since March 2018. Civil engineering activity increased marginally, with the rate of growth much softer than December’s 19-month high.
Commercial work was the weakest performing area of construction output in January. Latest data indicated a decline in work on commercial construction projects for the first time in ten months. Anecdotal evidence suggested that Brexit-related anxiety and associated concerns about the domestic economic outlook continued to weigh on client demand.
New business growth eased to an eight-month low in January.
Construction firms widely commented on softer demand conditions and longer sales conversion times, reflecting a wait-and-see approach to spending by clients. Concerns about the near-term outlook for new projects resulted in more cautious staff hiring policies at the start of 2019. The latest survey pointed to the slowest rise in employment numbers since July 2016.
However, construction firms remain positive about the outlook for business activity in 2019. Around 41% of the survey panel anticipate a rise in output, while only 16% forecast a fall.
Optimism had, however, fallen month on month. Large-scale civil engineering projects were cited as a key source of optimism, while Brexit uncertainty was the most commonly cited concern.
Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey: “UK construction growth shifted down a gear at the start of 2019, with weaker conditions signalled across all three main categories of activity.
“Commercial work declined for the first time in ten months as concerns about the domestic economic outlook continued to hold back activity.
“The latest survey also revealed a loss of momentum for house building and civil engineering, although these areas of the construction sector at least remained on a modest growth path.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said: “The sector suffered a sharp drop in output growth in January, and the softest rise in purchasing volumes since September 2017, as Brexit continues to hamper progress and dampen client confidence.
“The biggest shock came in the form of job creation which has managed to suffer the slings and arrows of Brexit highs and lows with solid hiring since the referendum result. Employment rose at the slowest rate since July 2016 and with optimism also in short supply, the sector only needs a small nudge to tip it closer to a recession.”
Commenting on the results, Brian Berry Chief Executive of the FMB, said: “The latest PMI data show a slowdown in growth in construction with business activity growth easing to its weakest for ten months. The ongoing political uncertainty is partly to blame for this setback.
“Political uncertainty is the enemy of construction firms that rely on the spending power of homeowners to commission home improvement projects. The UK is set to leave the EU next month, and yet we are still none the wiser about what the future holds. Given these intense headwinds, it should not be surprising that the sector suffered such a sharp decline.”
Mr Berry continued: “Alongside the political uncertainty, the cost of doing business is also rising for construction firms up and down the country. Material prices have been rising steadily since the depreciation of sterling following the EU referendum.
“Looking ahead, material prices are expected 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. What’s more the construction skills crisis means that key trades are extremely difficult to recruit and the upshot of this is rising wages in construction.
“Tradespeople know they can command higher salaries than they did previously as workers are scarce, and this means a squeeze in margins for firms. This will only worsen if the post-Brexit immigration system that the Government has planned goes ahead.
“If the sector isn’t able to draw upon crucial EU workers of all skill levels, who have so far served to mitigate this shortage, the slowdown of growth will continue.”
Business Wales delivers vital support
MORE than 20,000 jobs have been created since April 2015 by enterprises that have received support from the Welsh Government’s flagship Business Wales service, Economy Minister Ken Skates has revealed.
Business Wales makes it easier for Welsh micro-businesses and small and medium enterprises (SMEs) as well as aspiring entrepreneurs of all ages to access the information, advice and support they require to start and grow their businesses.
In addition to helping Welsh enterprises create more than 20,000 new jobs since April 2015, the service has handled over 60,000 enquiries and advised over 30,000 individual entrepreneurs and firms across Wales. It has also helped Welsh entrepreneurs create more than 4,000 new businesses across Wales with an impressive four year survival rate of over 80 per cent.
The Welsh Government continues to proactively support entrepreneurs at each stage of the business lifecycle from raising awareness of entrepreneurship with more than 200,000 primary school pupils right across Wales through to idea generation, start-up and on to sustainable growth.
In November, the Economy Minister announced proposals to build on Business Wales’ success to ensure its high quality is maintained and developed so even more firms and entrepreneurs can benefit from the service.
This includes how the service can prepare businesses for what the economy will look like after Brexit.
Business Wales also has an increasingly important role in supporting firms to rise to the challenges set out in the Welsh Government’s Economic Action Plan of preparing for digital developments, improving productivity, increasing the incidence of fair work, decarbonising and promoting inclusive growth.
Ken Skates said: “As we enter the New Year, it’s fabulous news and a great achievement that our flagship Business Wales service has supported the creation of more than 20,000 jobs since April 2015.
“That’s 20,000 people given an opportunity to work, earn a wage, make a living and help drive a productive Welsh economy. I am delighted we, as a Welsh Government, have played our part in helping Welsh entrepreneurs and SMEs to make that happen.
“Although 92 per cent of Business Wales customers say they would recommend the service to a friend, we’re certainly not resting on our laurels and I’m already looking at ways Business Wales can directly support more firms and entrepreneurs over the coming years.
“Small and medium-sized businesses are the backbone of the Welsh economy and vital to our economic outlook and the way communities throughout Wales operate from day-to-day.
“We will continue to support our SMEs and be on hand to provide the high-quality information, advice and guidance they need to thrive.”
Last remaining council owned shop in Llanelli Town Centre
Here is an opportunity to start the New Year in business – grab the last remaining council owned shop unit in Llanelli Town Centre.
Number 3 Cowell Precinct – most recently occupied by Clair Adams Schoolwear – is up for rent and is in a prime town centre location.
The ground floor unit is available at an affordable rent of just over £650 per month and coupled with reduced business rates being offered by the Welsh Government under its business rate relief scheme, it offers an attractive package to those thinking of opening up shop in Llanelli.
Retail space is approx 133.5 sqm and benefits from a main sales area with additional raised area with store room, WC and rear access. Front entrance is within Llanelli Indoor Market Precinct. The lease will be for a term of at least five years.
Almost £5million has been spent buying town centre properties from private ownership to renovate and offer to businesses at an affordable rent, and all but one council-owned property in the main shopping streets of the town are currently occupied.
Carmarthenshire County Council Cllr Leader, Cllr Emlyn Dole said: “We have acquired many properties from private ownership in the last couple of years. In doing so, we now have control over more business premises which allows us to set an affordable level of rent that will help new businesses to establish and sustain themselves. Many people are under the misconception that the council own all properties in Llanelli Town Centre – this isn’t the case and many are owned privately and over which we have no control.
“We continue to encourage private landlords and owners to make better use of town centre buildings by offering grants and loans as part of a range of incentives, including simpler planning rules to speed up the process for investors and developers.”
Llanelli’s Altalia restaurant to close after 18 years
THE OWNERS of a family-run restaurant in Llanelli town centre have decided to call time to focus on new ventures.
Al and Tal Einon, who run Italian restaurant Altalia on the corner of Stepney Street and Market Street, will serve for the final time on Saturday, December 21.
Carmarthenshire County Council, which owns the building leased to the business, has thanked the couple for their commitment to the town over the last 18 years.
The council is currently working on proposals to transform Market Street to provide a better connection with the main town centre and Eastgate.
It was hoped Altalia would stay as an anchor tenant within the new development, and the council has worked closely with the couple over the last year to plan ahead.
However, in a personal decision, the Einons have decided to bring their time in the town centre to a close and try something new.
“We are taking this opportunity to thank all our valued customers, many of whom are now friends and always will be,” they said.
“We have thoroughly enjoyed catering for Llanelli for some 18 years. The teams we have developed over the years really have been the best at their game and the fulfilment of training them, and our daughters, into capable caterers – both front and back of house – has been the most satisfying thing of all.
“All good things must come to an end, and we look forward to a new venture in 2020.”
Carmarthenshire County Council’s regeneration team are working on plans to transform several areas of the town.
Almost £5million has been spent buying town centre properties from private ownership to renovate and offer to businesses at an affordable rent, and all but three council-owned properties in the main shopping streets of the town are currently occupied.
The team also continues to encourage private landlords and owners to make better use of town centre buildings by offering grants and loans as part of a range of incentives, including simpler planning rules to speed up the process for investors and developers.
The next phase of development will see more mixed-use retail and residential space created, a model that has already proven successful along Stepney Street.
Market Street is one of the key sites earmarked for development to encourage more footfall and flow between the town centre and Eastgate.
The council is currently working on proposals for the area, with no firm plans about the site yet in place.
Feedback from members of the public, businesses and town centre stakeholders from a series of drop-in consultation events in the town centre during 2018 will be taken into consideration.
Cllr Emlyn Dole, Leader of the Council and Executive Board Member for Regeneration, said: “We thank Al and Tal for their service to Llanelli town centre for the last 18 years. They have provided a wonderful welcome to customers and have been a huge part of the town centre as our tenants. We have worked closely with the couple to plan for their future as part of our continued regeneration of Llanelli town centre, and whilst naturally we’re disappointed that they have decided to bring their business to a close, we fully understand and accept that decision and wish them well in their new ventures.”
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