James Parker looks at the prospects for house building and gives his forthright views on Brexit
Yes, the weather has been appalling in recent weeks – and certain world leaders might be more than troublesome – but you can’t blame everything on the Beast from the East.
While some builders might blame our useless March weather for stalling progress on house construction, the recent Purchasing Managers Index (PMI) report on the construction sector showed a continued downward trend in performance that can’t just be put down to snow.
Admittedly, the fact the PMI index showed the fastest overall decline in the sector since 2016 largely reflected a drop in work due to snow-based staff availability on site and bad weather stopping play.
Housing performed best
Housing actually performed best out of the sectors PMI measures, though arguably this is due partly to how badly commercial and civil engineering performed in March.
There were also disappointing figures on new orders and employment in the manufacturing sector – and this points to a bigger issue. Weather comes and goes, however Brexit is a far bigger challenge due to the sustained level of uncertainty it is creating.
The worry is that given the Brexit challenge, the resilience of the housebuilding sector is not a given, and the question is whether it can withstand a sustained battering from Brexit in the coming months.
The March PMI index followed a February reading that showed housebuilding to be lukewarm at best. Like manufacturing, new order volumes were poor, and businesses look to the future rather than the present.
Yet we know that the industry has an important role to play in building the homes desperately needed for the nation.
Keep calm and carry on
Business confidence is fragile in this uncertain climate, and the only sign of any concrete progress on the Brexit talks is that some clarity has emerged on when the transition period will end, namely the end of 2020.
Talk about small mercies – all we know is that there is a date when, potentially, some of the rules we currently obey in exchange for the benefits of being ‘in the club’ will end.
There are so many fine details to be ironed out before we get close to a trade deal, and most believe this needs to happen before the end of October.
It’s barely credible. And the biggest magic trick needed is squaring the circle of leaving the customs union without having a hard border between the north and south of Ireland.
To an outside observer, it must seem barely conceivable as a realistic prospect, to those involved, success looks dubious at best.
The EU seems willing to help, and Theresa May is going to try her hardest to produce the best deal she can. However what that means, when the EU will refuse to advertise leaving as a great idea to other countries, is very hard to see.
Little will change for now
In the meantime, while businesses and homeowners know that little may change practically until 2020, the uncertainty as to what their world will be like following that remains.
The outcomes look likely to include falling housebuyer confidence, reduced investment, and ever increasing materials costs. So I remain to be convinced that the trade off with our freedom to sell to other markets, which we already trade with, will be one worth making.
A new role in the world
There are of course benefits to being outside the EU, such as perhaps greater independence over our security, and a greater freedom to make deals with the rest of the world.
The UK is the world’s sixth biggest economy, and is still in the top 10 for manufacturing, not just financial services.
Brexit, if nothing else, is going to force the country to consolidate that manufacturing prowess and seek further markets, which can only serve to bolster the economy.
There is also the outstanding issue of the lack of homes, and affordable homes, which will not go away regardless of Brexit.
As a nation, we have simply not built enough houses for decades and this is where I believe the industry can play an important role in spite of the uncertainty regarding the future of our trade with the world. Getting our own internal housing market working more effectively is perhaps one positive to take from all this.
The other consideration with regards to these desperately needed new homes is that we should be able to ensure they use low-carbon renewable heating to help us meet the stringent emissions reductions targets that the country has to legally meet.
One thing is certain though, if we are to completely leave the EU as envisaged, despite all its benefits as well as challenges, UK industry will need to be resolute in its determination to make a success of the UK’s new role in the world.