Input Costs

2016 ended with input costs at a record high as the weak currency impacted costs of commodities and materials. Six months after the Brexit vote price rises are being realised across the industry as it restocks on new pricing, balancing input costs against margins.

Most indications recorded 2.2 to 2.5% annual growth in building material cost input and 2.8 to 3.3% growth in mechanical and electrical component inputs.

Fuel oils decreased in the quarter to average US$51 bbl, a 10% drop which was largely eroded on input by the strength of the US dollar.

Average weekly earnings ended up 2.2% in the year to the end of 2016.  Construction industry weekly earning remained buoyant, up 2.5% on the year, with the majority of national wage agreements settling above the rate of head inflation.

Imported cladding and curtain walling saw the highest annual rises of 18 to 20%, as raw materials and commodities pricing passed through, coupled with the continued project demand in 2016.

Unemployment

UK unemployment reached a low of 4.7% in the three months to January, the lowest recorded level since summer 1975.

The ONS estimates that some 900,000 people are employed on zero hours contracts, assisting the reduction in headline rates, but also demonstrating their fragility as employers can easily call off employment. 

Construction Output

Growth in construction output is forecast to slow down in the middle of 2017, declining from last quarter’s forecast.  The latest Construction Products Association (CPA) forecast indicates overall output of 0.8% in 2017, 0.7% in 2018 with a relative rebound to 2.2% in 2019.

Delayed investment in long term projects is impacting output figures with the commercial and retail sectors hard hit on lack of confidence and clarity.

Growth in 2019 is attributed to large infrastructure, such as HS2 and Hinckley Point C nuclear power plant. House building is seen as remaining buoyant with 2% growth per annum predicted as the Government support for new homes continues.