Market Intelligence Analysis of Brexit

Presented by Steve Baker

YORhub Frameworks Joint Chair of Operations

and Group Manager Construction Management Services

East Riding of Yorkshire Council

Data sets reviewed

• Markit/ Chartered Institute of Procurement & Supply Data

• Government Office of National Statistics

• Federation of Master Builders

• NACF Market Intelligence Maps

• Samples of Contractor Feedback

Markit/ CIPS Data 29 November 2016

Source: IHS Markit/CIPS

UK Construction PMI® by Category of Activity

Brexit Vote

Key Findings 29/11/2016

• Business activity

rises at fastest rate

since March

• Commercial work

picks up for first time

in 6 months

• Suppliers continue to

pass on higher

imported raw

material costs

Office for National Statistics

Economic Commentary January 2017

• The initial ONS data show the economy ended 2016 with steady

growth of 0.6% for the third consecutive quarter

• Construction remained broadly unchanged over the year as a whole

Office for National Statistics

Construction Output 3 monthly

The underlying pattern as suggested by the 3 month on 3 month

movement shows a slight contraction of 0.1%.

http://visual.ons.gov.uk/dashboard/

Trends to consider: May act as an indicator of how confident enterprises

are in investing in buildings and the infrastructure, as longer-term assets.

Updated: 11 January 2017

Office for National Statistics

7b CONSTRUCTION OUTPUT: VOLUME NON-SEASONALLY ADJUSTED GROWTH RATES

(£Million)

New Housing

Total

Housing

Other New Work

All New

Work

Repair and Maintenance

All Repair and

Maintenance All Work

Period

Public Private Infras-tructure

Excluding Infrastructure HousingNon-

Housing

R&MPublic

Private

Industrial

Private

Commercial Public Private Total

LATEST MONTH ON

PREVIOUS MONTH

OCT 2016 370 2,389 2,758 1,436 812 343 2,327 7,676 549 1,540 2,089 2,015 4,103 11,780

NOV 2016 389 2,342 2,732 1,510 883 330 2,235 7,690 551 1,612 2,163 1,950 4,113 11,803

% CHANGE 5.1 -2.0 -0.9 5.2 8.7 -3.8 -4.0 0.2 0.4 4.7 3.5 -3.2 0.2 0.2

LATEST MONTH ON A

YEAR EARLIER

NOV 2015 341 2,062 2,403 1,487 837 374 2,153 7,254 624 1,569 2,193 2,016 4,208 11,462

NOV 2016 389 2,342 2,732 1,510 883 330 2,235 7,690 551 1,612 2,163 1,950 4,113 11,803

% CHANGE 14.1 13.6 13.7 1.5 5.5 -11.8 3.8 6.0 -11.7 2.7 -1.4 -3.3 -2.3 3.0

LATEST 3 MONTHS ON

PREVIOUS 3 MONTHS

JUN 2016 - AUG 2016 1,120 6,977 8,097 4,141 2,683 1,026 6,681 22,630 1,664 4,493 6,157 6,022 12,179 34,808

SEP 2016 - NOV 2016 1,134 7,019 8,153 4,374 2,582 1,018 6,902 23,029 1,672 4,679 6,351 5,981 12,331 35,361

% CHANGE 1.3 0.6 0.7 5.6 -3.8 -0.8 3.3 1.8 0.5 4.1 3.2 -0.7 1.2 1.6

LATEST 3 MONTHS ON

A YEAR EARLIER

SEP 2015 - NOV 2015 1,048 6,267 7,315 4,624 2,533 1,140 6,459 22,071 1,917 4,695 6,611 6,129 12,738 34,809

SEP 2016 - NOV 2016 1,134 7,019 8,153 4,374 2,582 1,018 6,902 23,029 1,672 4,679 6,351 5,981 12,331 35,361

% CHANGE 8.2 12.0 11.5 -5.4 1.9 -10.7 6.9 4.3 -12.8 -0.3 -3.9 -2.4 -3.2 1.6

Federation of Master Builders

Published date: 09 January 2017

• 70% of UK builders have seen an increase in material prices due

to the depreciation of the pound

• with additional increases in material prices of 10 to 15% expected as

the new year unfolds

• Anecdotally, construction SMEs are already reporting an increase of

22% in Spanish slate and 20% increase in timber.

• A quarter of all materials used by the UK construction industry are

imported

http://www.fmb.org.uk/about-the-fmb/newsroom/70-of-builders-report-material-price-hikes

NACF Heat Maps

NACF Heat Maps

NACF Heat Maps

NACF Heat Maps

Actions from major national contractor

as a result of Brexit

January 2017

• Engaging with the supply chain to establish any concerns regarding

labour

• Identifying materials sourced outside the UK and the additional costs

due to fall in the value of sterling

• Seeking alternative materials where necessary

Actions from 2nd major national contractor

as a result of Brexit

January 2017

• Work closely with supply chain to monitor cost increases on imported

materials – to be honest this is quite negligible at the moment as big

cost items are sourced from national suppliers/manufacturers.

• Our procurement team feel that Brexit is being used as a reason to

talk prices up at the minute. One example are the SFS

Manufacturers- of the 6 main players, 4 are trying to increase costs

and two are saying there’s no change.

Summary

• After a drop in construction activity prior to the vote on 23 June 2016

by 31 December 2016 activity was similar to first quarter figures

• Would this have been better or worse with a remain vote?

• The drop in markets appears to be a result of responding to the fear of

the vote itself rather than the actual risk associated with a remain or

leave win. In all likelihood if the remain vote had won the 2016

outturn figures would be higher due to better exchange rates

Looking forward

• Increased imported raw material costs due to changing exchange

rates is likely to continue for the foreseeable future

• The FMB estimate that a quarter of all materials used by the UK

construction industry are imported. We recommend that Clients,

designers and contractors take this into account in their

projects.