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Construction output falls

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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.”

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Business

Enterprising Students win £10K prize

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A NEW venture designed to help Colombian farmers improve crop productivity is the winner of the latest edition of Aberystwyth University’s ‘Dragon’s Den’ style student entrepreneurship competition InvEnterPrize.

Developed by an interdisciplinary team led by PhD student Liliana Castillo from Colombia, Amigrow uses satellite technology and machine learning to assist farmers with decision making.

Along with the 2019 InvEnterPrize title, Amigrow receives £10,000 to invest in the development of the concept to bring it closer to market.

Speaking of the team’s success, Liliana said: “Winning InvEnterPrize is very important to us, there are no words to describe the feeling.”

“This idea started with my experience of agriculture in Colombia. With the support of InvEnterPrize, my team and I look forward to start testing the capabilities of Amigrow. We are going to develop the first prototype and create iterations of it so that we can really know what works and what doesn’t, and produce something meaningful for the farmers so they can take the right decisions at the right time and produce better profit margins.”

Liliana added: “Colombia is a very diverse country, we have very different environments for very different kinds of crops. Initially, we are going to start with rice producers as it is very important for feeding people in Colombia and in the world.”

Amigrow was one of 15 entries for InvEnterPrize 2019, and six finalists to present their ideas to the judges on Friday 29 March 2019.

Chair of the judges, Donald Davies, Emeritus Professor in Toxicology at Imperial College London, said: “We are delighted to award InvEnterPrize 2019 to Amigrow and our warmest congratulations to Liliana and her team on their venture.”

“InvEnterPrize is an excellent competition which brings out the best in the students, and this year has proved to be the most difficult to judge with all six finalists delivering excellent presentations. It clearly inspires students here at Aberystwyth University to venture and develop ideas that go beyond what they might normally do. It is so important to sow the seed of an idea that students can develop into a business, and this competition, along with the support the teams receive throughout the year from the University’s Careers service, makes this all possible.”

InvEnterPrize organiser and Aberystwyth University entrepreneurship champion, Tony Orme, said: “The quality of the entries this year has been exceptional and the final proved to be a very close run indeed. We are immensely grateful to our panel of judges for their valuable time and expertise in this year’s search for a winner, and to the University’s alumni who make this competition possible via the Aber Fund. We now look forward to working with Liliana and colleagues on Amigrow, as the concept is developed.”

Amigrow also enjoyed further success at InvEnterPrize 2019 as it won a year’s office space at AberInnovation – the Aberystwyth Innovation and Enterprise Campus, a £40.5m development at the Aberystwyth University Gogerddan Campus.

Presented by Dr Rhian Hayward, Chief Executive Officer of AberInnovation, the award was given for the best presentation in the bioscience, agri-tech, and food and drinks sectors.

Now in its 6th year, InvEnterPrize was established to further encourage a culture of entrepreneurship among the University’s students.

The £10,000 prize provided by the University’s alumni via the Aber Fund enables the winner to invest in equipment, facilities or professional services to turn the invention or business start-up idea into reality.

Entrants also had the opportunity to seek expert advice and attend a series of workshops and presentations led by successful entrepreneurs as they developed their final bids, gaining valuable advice on the way.

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Business

Backing for two City Deal business cases

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MEMBERS of the Swansea City Deal’s Economic Strategy Board are supporting a call for immediate approval of two major Swansea Bay City Deal projects.

The Economic Strategy Board (ESB), made up of private sector business persons appointed to the ESB say they want to help get the ‘Yr Egin’ and Swansea City and Waterfront Digital District projects over the finish line.

Their support comes after an independent review into the £1.3 billion Swansea Bay City Deal found that the businesses cases for these two projects are ‘fit for purpose’.

The same review also found serious problems with the way in which some business cases were prepared, describing them as little more than glossy marketing exercises devoid of detail and substance.

The Economic Strategy Board is made up of experts in key City Deal themes like energy, manufacturing, skills, life sciences, and business.

Chaired by Ed Tomp, the Vice-President and General Manager of Valero UK in Pembrokeshire, private sector board members include Scarlets chairman Nigel Short, retired consultant surgeon oncologist Simon Holt, and Pobl Group chief executive Amanda Davies.

Chris Foxall, finance director of Welsh car manufacturer Riversimple, and James Davies, Industry Wales executive chair, also sit on the board.

As well as an independent review, an internal review commissioned by the City Deal’s Joint Committee has also been completed to ensure governance is robust.

It found it wasn’t and described a breakdown in trust between the public sector partnership members.
The Economic Strategy Board provides strategic direction for the City Deal and advises the Joint City Deal Board.

Its functions include overseeing the production of project business cases and making recommendations for approval.

Mr Tomp said: “The Economic Strategy Board welcomes the publication of the reviews into the City Deal.

“Both include a number of recommendations which should speed up the City Deal’s delivery for the benefit of residents and businesses across South West Wales.

“Among the recommendations endorsed by the Economic Strategy Board is the immediate approval of the ‘Yr Egin’ and Swansea City and Waterfront Digital District projects, so we’ll do all we can to help with that process.

“The first phase of the ‘Canolfan S4C Yr Egin’ development is a terrific example of how state-of-the-art office and networking spaces can support our creative industries, while the Swansea project will combine world-class entertainment and 21st-century business facilities with cutting-edge digital infrastructure.”

Canolfan Yr Egin was never part of the City Deal and was tacked on after its construction was already underway. The involvement of the City Deal in the project is a fig leaf for UWTSD’, which despite promising it could deliver the project without public subsidy, went cap in hand to the Welsh Government when it couldn’t.

Public funding for Yr Egin was agreed by Economy Secretary Ken Skates over six months before the City Deal was even signed.

Mr Tomp continued: “Approval of these business cases as soon as possible would help maintain private sector confidence in the City Deal while showing the commitment of all partners to work together for the good of the Swansea Bay City Region.

“In the meantime, we’ll also continue to help progress business cases for the nine other projects due to be part City Deal funded because this investment programme has the potential to transform our region’s economic well-being.”

Chris Foxall said: “The Swansea Bay City Deal is a once in a generation opportunity to kick-start a sustainable regional economic development programme. It’s more than just investment – it’s the start of a journey that will build momentum, confidence and prosperity for our future generations. The City Deal’s breadth of sectoral and geographic coverage will ensure the impact is felt by everyone in the region, and the first two projects will evidence the physical and economic transformation that’s long overdue.”

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Business

Construction output falls as productivity shrinks

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THE GOVERNMENT and Parliament must break the Brexit deadlock and find a way forward warns the Federation of Master Builder (FMB), in response to the latest Construction PMI data, which shows another drop in construction output.

The March 2019 PMI data revealed an Index score of 49.7, up slightly from 49.5 in February, against the no change threshold of 50.0. This points to a sustained decline in construction output, representing the first back-to-back fall in construction output since 2016. While the residential building sector enjoyed an upturn, commercial construction was the worst performing area.

Commenting on the results, published this morning, Sarah McMonagle, Director of Communications at the FMB, said: “The construction industry is being seriously affected by Brexit uncertainty as evidenced by two very worrying sets of results for construction output in the first quarter of 2019.

“Businesses have been waiting for politicians to come to some resolution for far too long now, and it’s time that this deadlock was broken. It’s not surprising employers are finding it hard to plan for the future, when we don’t even know when, or indeed if, we’re leaving the EU. Today’s results are a reminder of just how vulnerable the construction industry is to political turmoil as confidence among consumers and contractors continues to wobble.”

Ms McMonagle concluded: “Brexit uncertainty and the construction skills shortage have created a perfect storm in our industry.

“Around 9 per cent of construction workers in the UK are from EU countries, but we know from speaking to small construction employers that many of these skilled workers are starting to return, whether that’s because of strengthening economies elsewhere, or that they simply don’t feel welcome anymore. This is compounding an already severe construction skills shortage, and I’m worried that the Government’s post-Brexit immigration system will make it even worse. For example, the system will not allow Level 2 tradespeople to live and work in the UK for more than 12 months at a time. At the same time, the Government’s figures last week show that the number of Level 2 apprenticeship starts among our domestic workforce is dropping.

“It’s quite simply not possible to build the homes and infrastructure we need without bricklayers, carpenters and plasterers. The Government and industry must work together to attract more people into the industry, by offering them high quality training with clear career pathways for progression but in the meantime we need sustained access to tradespeople of all skill levels for the industry to continue being open for business.”

Elsewhere in the economy, the Federation of Small Businesses has expressed concern at the UK’s productivity growth in Q4 of 2018 decreasing for the second consecutive quarter.

Federation of Small Businesses (FSB) National Chairman Mike Cherry, said: “Today’s data highlights yet again the impact of the political and economic uncertainty to the economy.

“Small business confidence has fallen through the floor as firms face a trying time amid a fragile economy.

“While there were some positives in the data such as a 0.4% productivity increase in services, there was a significant 1.1% decrease for manufacturing.

“Small firms are not only contending with unprecedented uncertainty, they are also dealing with a raft of new cost increases and reporting requirements.

“Rising labour costs have continued with the introduction of Making Tax Digital, fresh hikes to business rates and a further increase in auto-enrolment pension contributions.

“In order to improve productivity, key areas that must be addressed include management and leadership, broadband connectivity and the scourge of late payments.

“All this amid the ongoing uncertainty over the future of the UK’s relationship with the EU which shows no sign of reaching a resolution.

“Productivity will only continue to decline unless the Government can do more to step up and back British businesses.”

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