• Research

Market uncertainty continues to buffet UK construction

With just seven months until the Brexit negotiation deadline, the UK is fast approaching a pivotal moment, with a potential ‘no deal’ situation presenting significant change for business. This would carry both tariff and non-tariff barriers that present risks and opportunities to future investability and deliverability for some sectors in UK construction. As a result, the nature of the Brexit deal will be a key factor affecting construction’s future outlook.

Will Waller

Director - Head of Futures +44 (0)7787 152 097 Ask me a question

The nature of the Brexit deal will be pivotal to construction’s future outlook

The UK economy grew just 1.8% in 2017; the slowest rate of growth for nearly six years.  Weaker economic growth is often accompanied by less buoyant construction demand, which carries some significant downside risks to the market. In particular, uncertainty is hampering investment decisions in a number of key sectors. The potential for faster and higher interest rate rises may also threaten continued growth in the private residential market. 

The impact of Carillion’s failure

Market uncertainty has been compounded by the high-profile collapse of Carillion. The failure of the UK’s second largest Tier 1 contractor marks an inflection point in the industry and will change commercial dynamics, including pricing behaviours, for the foreseeable future. 

In the short term, the number of retendering opportunities will impact capacity and reduce competitive tension, as well as potentially inflate prices thanks also to a hardening attitude to risk. Any processes aimed at providing assurance around financial risk and governance need to be reviewed to ensure they are as robust as possible. 

In the longer term, clients may need to review what risk is transferred to the supply chain, and how. There may be a greater focus on transparency of risk management and an increased push earlier on in projects to eliminate risks that can be avoided.

Questions about this article

Will Waller

Director - Head of Futures +44 (0)7787 152 097 Ask me a question

Arcadis White paper

Spring Market View

With just seven months until the Brexit negotiation deadline, the UK is fast approaching a pivotal moment, with a potential ‘no deal’ situation presenting significant change for business. This would carry both tariff and non-tariff barriers that present risks and opportunities to future investability and deliverability for some sectors in UK construction. As a result, the nature of the Brexit deal will be a key factor affecting construction’s future outlook.

Download