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Q U I C K L I N K S …
Major announcementsConstruction headlinesDetailed sector analysis
I N T H I S J U N E I S S U E …
Value of contracts awarded in May reached £4.5 billion, it’s lowest total for more than 5 yearsREAD MORE
£130 million residential units at Wembley Stadium Station were keyREAD MORE
London topped the regions again with an 18.8% share of the totalREAD MORE
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E C O N O M I C C O N T E X T …
Signs of improvement but UKstillbehindothersinG7
ThesecondestimateofGDPfromtheONSconfirmedthattheUKeconomygrewby0.1%,unrevisedfromtheinitialestimate.Thesecondsetoffiguresconfirmedconstructionhadapoorfirstquarteranddeclinedby2.7%althoughthiswasanupwardrevisionof0.6percentagepoints(seefig.1.1).Theother sectors remained broadly the same. Analysing GDPfromanexpenditureperspectivethefiguresshowed that the growth was derived from consumer
expenditure and government spending (even though growthrateswerefalling).However,usingthismeasure shows that business investment declined by0.2%inthesecondquarterandwasanetdragonoverallgrowth.Thiswasthefirstfallinbusinessinvestment since Quarter 4 2016 and the declines were mainlyfromfirmsoperatingintheservicesector.ThisconfirmsthepictureoftheUKeconomyatthestartofthe year as consumers and government still spending
(althoughatslowingratesofgrowth)andbusinessesare, on the whole, holding back from investment.
EconomyComparingthisfirstquarterperformancewiththeothermajoreconomiesacrosstheglobeshowsthattheUKeconomyisnearthebottomofthecharts(seefig.1.2).TheUSAhadastrongstartto2017withquarter-on-quartergrowthof0.6%asbothconsumerspendingand
The second quarter shows signs of improving economic conditions but overall growth still likely to be below the long term trend.
2.7%decrease in construction in Q1 2018
News this monthOthernewsthismonthontheUKeconomyincludes:
The CBI business survey recorded an increase in business sentiment in May rising to +10 from +3 in April
The British Retail Consortium reported that UK retail sales grew by 2.8% in May, the fastest growth since April 2017
Bank of England fi gures showed that lending for consumer credit was up by 8.8% in April an increase from 8.6% in March
A survey by the Society of Motor Manufacturers and Traders showed that new car sales were 3.4% higher in May than in the same month last year, although sales of diesel cars in particular signifi cantly down.
ECONOMIC CONTE X T 1.2
GDP country comparison | Source:Markit
GDP
grow
th (%
)
UKItalyGermanyFrance Canada USAJapan-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
ECONOMIC CONTE X T 1.1
GDP Components Q1 2018 | Source:ONS
-2
-1
0
1
2
3
% a
nd p
erce
ntag
e po
ints
Q1 2017Q4 2016Q3 2016Q2 2016 Q1 2018Q4 2017Q3 2017Q2 2017
Private consumption Government consumption
Gross Capital Formation Net trade GDP
-2
-1
0
1
2
3
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ECONOMIC CONTEX T… SignsofimprovementbutUKstill behindothersinG7
business investment remain relatively buoyant. France, Germany, Italy and Canada had a solid, if unspectacular, startto2018with0.3%quarterlygrowthineachcountry.TheUKwassecondbottomwithits0.1%figurewithonlyJapanfaringworsewithacontractionof0.2%.LookingforwardthePMIindicatorsforthesecondquarterpointtoareboundingrowthintheUK.AccordingtoMarkit,theUKallsectorPMIreadinginMaywas54.3(areadingabove50indicatesexpansion)followingonfromanincreaseinApril(seefig.1.3).ThesereadingsareconsistentwithGDPgrowthofbetween0.3%and0.4%basedonhistoricaltrends.However,thePMIreadingsindicateaweakeningofnewordersintheUKeconomywhichislikelytoharmeconomic growth into Quarter 3 and Quarter 4.
UnemploymentThelabourmarketisstillprovingtobeparticularlyrobust with the level of unemployment remaining at 4.2%inthethreemonthstoApril(seefig.1.4).Thisisthe joint lowest rate of unemployment since the period MarchtoMay1975.Formalestheunemploymentratewas4.3%upslightlyfrom4.2%inthepreviousperiod.Thefemaleunemploymentratewas4.1%whichwasthe joint lowest rate since comparable records began
in 1971. In numbers there are 1.42 million unemployed peopleinthethreemonthstoMarch,whichis115,000lessthanthesameperiodinthepreviousyear.Thereare 767,000 unemployed men, 973,000 less than a year earlier and 649,000 unemployed women, 41,000 less than a year earlier. In terms of the length of unemployment for February to April 2018 there were 833,000 people who had been unemployed for up to six months, 63,000 less than in the same period a yearbefore.Therewere214,000peoplewhohadbeenunemployed for between six months and one year which was 35,000 fewer than the year before. Finally, there were 369,000 people who had been unemployed for over one year, which was 17,000 less than a year earlier.
InflationThelevelofinflationincreasedslightlyinMayreversingthe downward trend witnessed since the start of 2018. ThelatestindicatorfortheConsumerPricesIndexincludinghousing(CPIH)recordedafigureof2.3%inMay,upfrom2.2%inApril.Thepricepressurefrommotor fuels has risen meaning transport costs rose 4.6%inMay2018thelargestincreasesinceApril2017whenitwas6.2%.Petrolpricesincreasedby4.6penceperlitrebetweenAprilandMay2018recordingafigure
continuetostrugglethesentimentforUKprospectsisskewedtothedownside.HoweverthePMIsurveysare pointing to some rebound of activity in the second quarterof2018,thoughanythinglowerthan0.4%willbe disappointing. Brexit remains an immediate and long term risk to economic growth and as negotiations continue more certainty will help businesses with their investment decision process. However, given the lack of claritythusfaritisdifficulttoassessitsfullimpactonUKeconomic growth in the future.
of 125.3 pence per litre, the highest level October 2014. Price pressure in the housing and household services sector eased with domestic electricity prices rising by 0.1%betweenAprilandMaycomparedwith4%inthesametwomonthsayearago(seefig.1.5).
OutlookTakentogetherthisdatashowsacomparativelypoorstarttotheyearfortheUKeconomycomparedtoitspeers in the G7. As consumer-focussed service industries
ECONOMIC CONTE X T 1. 5
Consumer Prices Index | Source:ONS
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Food and non-alcoholic beverages
Alcoholic and tobacco
Clothing and footwear
Housing and household services
Furniture and household goods
Transport
Recreation and culture
Restaurants and hotels
Other goods and services
% P
oint
s
M J J A S O N D J F M A M J J A S O N D J F M A M
2016 2017 2018
ECONOMIC CONTE X T 1. 3
UK PMI and GDP compared | Source:IHSMarkit,CIPS,ONS
2014
Olympics
Globalfinancial
crisis
EU referendum
2015 2016 2017 20182010 2011 2012 2013200920082007
1.6
0.8
0.0
-0.8
-1.6
-2.4
62
58
54
58
50
46
42
38
34
UK G
DP, c
onst
ant p
rices
q/q
% ch
ange
All Sector PMI (O
utput Index)
ECONOMIC CONTE X T 1.4
Unemployment rate | Source:ONS
4
5
6
7
8
9
% o
f eco
nom
ical
ly a
ctiv
e
Feb2013
Feb2014
Aug2013
May2013
Nov2013
May2014
Nov2014
May2015
Nov2015
May2016
Nov2016
May2017
Nov2017
Aug2014
Feb2015
Aug2015
Aug2016
Feb2017
Aug2017
Feb2016
Feb2018
3 month period (starting month shown)
Women
Men
People
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T H E C O N S T R U C T I O N S E C T O R …
Both contract awards value and numberofprojectsdipinMay
% change
3 months to Apr 2018 Mar 2018 – Apr 2018
Total All Work -3.4 0.5
All New Work -3.7 0.7
• Public Housing -6.3 -0.5
• Private Housing -2.2 0.6
• Infrastructure -8.0 2.8
• Public(exInfrastructure) -7.2 -3.6
• Private Industrial 2.8 -1.8
• Private Commercial -1.9 1.6
Repairs & Maintenance -3.0 0.3
• Public Housing -5.8 0.1
• Private Housing -2.3 -1.3
• Non-Housing -2.8 1.7
ThelatestfiguresfromtheONSindicatetheconstructionsectorintheUKdeclinedby3.4%inthe three months to April, compared to the previous threemonths.Thefiguresforindividualmonthsshow that construction output in April increased by0.5%afterthefallsinJanuary,FebruaryandMarch.Thisisapositivehoweverthescaleofthebouncebackwaslowerthanexpectedafterthepoorstarttotheyear.Andthethreemonthfigures
demonstrate the longer term performance of the industry has been poor.Therewerefallsacrosstheboardintheselatestfigureswiththesharpestdecreasesintheinfrastructure sector. Infrastructure output declined by8%inthethreemonthstoAprilcomparedtothepreviousthreemonths(seefig.2.1).Whilemajorprojects such as HS2 are in the pipeline actual work at the moment appears to be sparse. Output in private
housing, the bellwether of the industry in recent years,alsofellinthethreemonthstoApril.Newprivatehousingdeclinedby2.2%intheperiod,andoutput in housing repair and maintenance declined by2.3%.Howeveritshouldbenotedthatnewprivatehousingoutputwasstill6.8%higherthanthesameperiodof2017sothereisalongertermincrease.Thecommercial sector remains challenged with output fallingby1.9%inthethreemonthstoApril.
New methodologyItwasalsoannouncedbytheONSthismonththata new methodology would be introduced aimed at reducing the scale of the revisions to construction outputfigures.Inrecenttimestheconstructionoutputhasbeensubjecttosignificantmajorrevisions from the initial release. On average the monthlyfiguresexperiencedanupwardrevisionof0.7%oftenpaintinganexaggeratedpictureofwhatwashappeningontheground.Thisismainlyduetothelatereturnofsurveyresponses.Thisimprovedmethodology from the end of this month with the outcomeamoreaccuratemonthlyfigureintheinitial estimate.
Construction SectorThevalueofallnewconstructioncontractsawardedinMay,accordingtoBarbourABIdataonallcontractactivity, was £4.5 billion based on a three month rollingaverage.Thisisan8.9%decreaseonAprilandfollows6.8%decreasebetweenMarchandApril2018(seefig.2.3).Comparisonswith2017showthatMay2018was8.0%downonMay2017.QuarterlyanalysisindicatesthatforthethreemonthstoMay2018 total contract awards were £14.7 billion which compares to £16.8 billion for the comparable quarter in2017.ThenumberofcontractsawardedinMay
May has seen 8.9% decrease in contract awards values but the industrial and education sectors have seen some growth.
8.9%Decrease in contracts from April 2018
CONSTRUCTION SECTOR 2.1
Construction activity by sector | Source:ONS
The total value of new construction contracts in May was down by almost 9% compared to the previous month. Residential and infrastructure, traditionally the two largest sectors within construction, once again saw a decrease in contract values, which made it a diff icult task for the rest of the industry to make up the defi cit.
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CONSTRUCTION SECTOR… BothcontractawardsvalueandnumberofprojectsdipinMay
was845whichisan9.8%decreaseonAprilandalso6.5%lowerthanMay2017.Theoverallpictureforconstruction in 2018 shows a lower level of contract activity than in H2 2017, but with a downward trend forcontractsawardsvaluessinceMarch2018.
Projects by RegionLondon was the leading region for contract awards inMaywith18.8%share,followedbytheEastofEnglandwith14.0%shareofcontractawardsvaluesandtheNorthWestwith13.5%share(seefig.2.2).ThehighestvaluecontractawardinMaywasthe
£130 million scheme to build 553 residential units at Wembley Stadium Station in London. Wales was the region with the second largest contract award withthe£100millionClocaenogForest96MWWindFarmprojectnearDenbigh.Thenexthighestvaluecontract award was the £80.4 million award for Phase1BoftheMidlandsLogisticsparkatCorbyinNorthamptonshirewhichwillseetheprovisionof78,410sqmofwarehousingfloorspace.
Types of ProjectTheresidentialsectoraccountedforthelargestshareofcontractawardsinMay2018withadominant44.4%share.ThismeansthattheothersectorshadsignificantlysmallersharewiththesecondlargestsectorinMaybeingindustrialwith14.0%followedbyeducationwith12.6%shareofcontractawardsvalues(seefig.2.4).Thehighestvalue residential contract was the £130 million scheme at Wembley Stadium Station for 553 units.
ThelargestindustrialcontractwasintheEastMidlandsandwasthe£80.4millionawardforPhase1BforoftheMidlandsLogisticsParkinCorby.TheNorthWestwasthelocationforthehighestvalue education contract award which was the £40millionredevelopmentoftheManagementSchoolfortheUniversityofLancaster.
CONSTRUCTION SECTOR 2. 3
Construction activity trends | Source: Barbour ABI
0
200
400
600
800
1000
1200
1400
Num
ber of Contracts
0
1000
2000
3000
4000
5000
6000
7000
8000
Valu
e (£
mill
ion)
M J J A S O N D J F M A M J J A S O N D J F M A M2016 2017 2018
Rank Project Value (£m) Region Sector
1Wembley Stadium Station – Building 3B within plots SW03, SW04 & SW05
130 London Residential
2 ClocaenogForest96MWWindFarmProject – Denbigh 100 Wales Infrastructure
3 MidlandsLogisticsPark–Phase1B 80.5 EastMidlands Industrial
4 AldiRegionalDistributionCentre,Elstow 75 EastofEngland Industrial
5 EuropeanTrainControlSystem(ETCS)– Anglia Line 55 EastofEngland Infrastructure
6 Portal West Development – 578 apartments / commercial space 50 London Residential
7 MalyonsFarm,Hullbridge–500housesandflats 50 EastofEngland Residential
8 LiverpoolRoadFormby–317houses 48 NorthWest Residential
9 1StationSquare–128flats/commercial unit 45 London Residential
10 Alwalton Hill Development, Plot 111 A – distribution warehouse 41.8 EastofEngland Industrial
CONSTRUCTION SECTOR 2. 5
Top ten biggest projects by value | Source: Barbour ABI
CONSTRUCTION SECTOR 2.2
Locations of contracts awardedSource: Barbour ABI
CONSTRUCTION SECTOR 2.4
Type of projects | Source: Barbour ABI
Residential
Industrial
Commercial & Retail
Hotel, Leisure & Sport
Medical & Health
Education
Infrastructure
8
13
7
2
44
14
%12
13%
4%
5%
13%
5%
7%
5%14%
7%
19%
9%
East Midlands
East of England
London
North East
North West
Scotland
South East
South West
Wales
West Midlands
Yorkshire & Humber
London accounted for 18.8% of the contract value in May, which included four of the top ten biggest projects across the month.
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