Looking forward to 2016

Wow, how did it become mid-January already? Having spent a couple of days in Hull one thing you notice is the development – it’s not large over-sized cranes but small developments spread across the City with the new C4Di building standing proudly along the dock. Quite reassuring that development fever spreads from Liverpool across to Hull – a true powerhouse is being formed. Further this supports the latest Markit/CIPS survey which shows commercial work output recovering from the November seven-month low.

Those who believe the bubble has burst need only consider these results. The UK economic conditions are continuing to boost and support the demand for commercial construction projects. The unfortunate flooding that has devastated the North will also provide a large number of projects as people seek to rebuild communities and the Government surely starts investing in infrastructure projects to prevent this happening in the future – maybe use Pickering as an example.

Housing activity also increased from the 29-month low seen during November and things seem to further be improving with Barratt announcing last week that 18 Yorkshire sites will opened creating a significant amount of jobs and benefits for the economy. Hopefully the houses and developments will be more like their Derwenthorpe site than Saunderson Gardens - mass housing doesn’t have to be bland!

The boost to housing provided by the Government planning to sell publicly-owned sites with planning permission will be a boost to the SME housebuilders across the country. The policy, designed to enable quality homes to be built quicker by small housebuilders, will create thousands of homes. However, the challenge is that there was not really any clarity by the Government on how the scheme was any different than what is already in place (other than good marketing). To me it seems simply the only difference is planning permission (outline or full is not yet clarified), which actually for an SME would be more attractive as less risk the scheme is rejected by planning.

UK construction companies finished 2015 in a positive fashion with commercial buildings the main engine of growth, with this area of activity expanding at the strongest pace since autumn 2014. Across the UK construction sector I have a strong degree of optimism about the outlook for 2016. The challenge for 2016 is improving margins and finishing the legacy contracts still heightened in risk but also a concern about tax and the lack of reform to the planning system.

The government’s shake-up of stamp duty is not the only tax-related issue. Taken together with the changes to tax on dividends and the community infrastructure levy, there is growing concern the chancellor is looking to raise more money from business and that the tax burden could increase further. Planning regulation also remains the major bugbear of the industry and simplification of the planning process is needed.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

 

Enjoy the weekend

Lee