07th January 2019
2018 in Review: The UK Construction Industry
Last year was another busy year for the UK’s construction industry - and not always in the right ways. For many in the industry, it’s been a year of cautious preparation for changes coming in the new year. But there are plenty of signs for optimism, as we’ll explore in this round-up of the biggest construction news of 2018.
Carillion goes into liquidation
The year was off to a difficult start after construction giant Carillion collapsed spectacularly in mid-January. 20,000 UK employees were directly affected, with many more smaller contractors impacted by the knock-on effects in the supply chain. The company finally ran out of cash and became overwhelmed by £1.5 billion in debt. Carillion’s notorious 120 day payment terms may have disguised its cash problems for several years - and it was estimated that around 30,000 businesses were owed money by Carillion. At the time of writing, there are concerns that Carillion’s former competitor Interserve could face a similar fate.
Persimmon chief exec’s £75 million bonus
In February, Persimmon announced they would be cutting their top team’s bonuses by £51 million. The managing director would receive a reduced £38 million bonus, the finance director would get a paltry £54 million, and chief executive Jeff Fairburn would only receive £75 million. While the story didn’t gain much traction at the time, during an interview with the BBC in October, Fairburn refused to answer a question about the bonus, and walked away. Much of the backlash related to Persimmon’s excellent results indirectly being subsidised by the government’s Help to Buy scheme.
The Beast from the East
Another difficulty early in the year was our extended winter, thanks to the ‘Beast from the East’. This weather system brought unseasonably cold air to the UK during late February and early March, which combined with a storm to bring significant snowfall to the UK. The dreadful weather stalled construction projects and caused plenty of disruption to supply chains.
Theresa May announces lift on council borrowing limits
Recognising that borrowing restrictions are one of the main obstacles to council housebuilding, the Conservatives announced that they would lift these restrictions in order to tackle housing shortages. At the time of writing, we don’t have a schedule for when the cap will be lifted, but the announcement was generally welcomed back in October.
An optimistic second half
2018 was a year of two halves - the second half of the year saw improved output and optimism in the UK’s construction industry, with The IHS Markit/CIPS UK Construction PMI entering positive territory post-Beast from the East. Since April, the index has stayed above the 52 mark, indicating a sustained recovery from the difficult start to the year. Data from the ONS paints a similar picture - a contraction in Q1, a slow recovery in Q2, and a 2.1% boost in output for Q3, thanks to significant jumps in the private housing and infrastructure sectors. Builders Merchants also saw significant growth in Q3, with sales rising 4.2% on the same period in 2017 - the hot, dry summer surely played a part.
What does 2019 have in store?
First of all, a couple of significant legislation changes are coming into force in early 2019: Making Tax Digital and the VAT reverse charge. Speak to your accountant or accounting software provider to ensure you’re ready for both these changes.
And of course, the elephant in the room - Brexit. With so much uncertainty surrounding the UK’s exit from the EU, businesses should try build plans for all of the potential eventualities - particularly regarding supply chains.
Keep checking back to the Integrity Software blog for the latest on what’s set to be another eventful year for construction.