Noble Francis Profile picture
Sep 29 18 tweets 17 min read
A long thread on the initial direct & indirect impacts of the chaos in the markets over the past week on UK house building & construction ...
#ukconstruction #construction #ukhousing #housing
It's clearly early days into the government-made chaos in the financial markets but there are some impacts for the UK construction industry that we can identify (albeit quantifying them is a much greater issue)...
#ukconstruction #construction #ukhousing #housing
Firstly, Sterling depreciations mean further rises in construction materials prices, which in July 2022 were already 24% higher than a year ago. Sterling has depreciated 12% since the end of July &...
#ukconstruction #construction #ukhousing #housing
... this will increase the price of imports. Directly, the price of imported construction products (such as steel, aluminium and electrical wiring) will increase even more sharply. In addition, however,...
#ukconstruction #construction #ukhousing #housing
... the price of domestically made construction products will also rise further as they use input materials & components that are imported plus fuel/energy often priced in dollars. This means that...
#ukconstruction #construction #ukhousing #housing
... all construction sectors will be badly affected over the next 12-18 months as construction cost rises more sharply. Costs were rising in the past 12 months but that was whilst demand was rising sharply as well. However,...
#ukconstruction #construction #ukhousing #housing
... the markets chaos has led to sharp rises in expected interest rates, badly affecting homeowner (mortgage & remortgage) costs when real household income is falling. A week ago markets expected interest rates rising to 3% but...
#ukconstruction #construction #ukhousing #housing
... now they expect rates rise to around 6%. The mortgage rates rise means demand in the housing market (prices, transactions), & so house building (the largest construction sector), will be heavily impacted. House building was...
#ukconstruction #construction #ukhousing #housing
... was already expected to slow towards the end of this year & into next year but now the house building fall is likely to be sharp as house builders are hit on both the demand & supply (cost rises hitting margin) side...
#ukconstruction #construction #ukhousing #housing
... In addition, the rates rises for those remortgaging means many households will be coming off low fixed-rates & finding mortgage payments rise sharply when real incomes are falling. Some households may be forced sellers but...
#ukconstruction #construction #ukhousing #housing
... a wider issue is households servicing higher mortgage payments by cutting discretionary, non-essential spending, i.e. sharp falls in private housing repair, maintenance & improvement, the 3rd largest construction sector...
#ukconstruction #construction #ukhousing #housing
... & a sector in which output has been falling since March already but output in the sector in July 2022 was still 15.5% higher than pre-pandemic so it has a long way further to fall. Looking to...
#ukconstruction #construction #ukhousing #housing
... other areas affected on the demand side, commercial (offices, retail, leisure), the 4th largest construction sector, is reliant large, upfront investment (from international investors) for a long-term rate of return that is...
#ukconstruction #construction #ukhousing #housing
... now under threat as investors have suddenly become risk-averse to major new investment in commercial towers at a time when costs are also spiralling so projects will be paused (for repricing), pushed back or cancelled. Theoretically,...
#ukconstruction #construction
... infrastructure, the 2nd largest construction sector, is the least affected as finance (central government/local authorities & regulated sector firms) is more stable. However, the sharp cost rises mean that...
#ukconstruction #construction #ukinfrastructure #infrastructure
... with constrained finances set in November 2021's 3 year Spending Review & 5 year spending plans for regulated sectors respectively, what we will see near-term is the value spent but falls in volume & then...
#ukconstruction #construction #ukinfrastructure #infrastructure
... in the medium-term projects towards the end of Spending Review & regulated sector spending plans will get pushed back into the next ones due to lack of finance whilst local authorities, which are already...
#ukconstruction #construction #ukinfrastructure #infrastructure
... financially-constrained, will be cutting new projects to divert finance towards rising costs in basic repairs & maintenance.
#ukconstruction #construction #ukinfrastructure #infrastructure

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More from @NobleFrancis

Jun 1
A further rise in UK construction materials prices as expected as the spikes in energy costs & commodity prices continue to feed through after the Ukraine invasion. Materials prices in April 2022 were 25.2% higher than a year ago according to BEIS...
#ukconstruction #construction Image
... & the 25.2% annual increase in UK construction materials prices in April 2022 compares with 24.5% in March & the recent peak of 23.7% in October 2021 (when there were materials availability issues) & it is worth noting that, firstly,...
#ukconstruction #construction Image
... materials prices in April 2022 were not only 25.2% higher than a year ago but prices are now 38.4% higher than in January 2020, pre-pandemic, which affects contractors on fixed-price contracts signed up to over the last few years, secondly...
#ukconstruction #construction Image
Read 10 tweets
Sep 27, 2021
Lee Rowley is the new Construction Minister, making him the 9th Construction Minister in the last 5 years and the UK currently averages 1 construction minister every 7 months...
#ukconstruction #construction
... Looking over the longer-term, Lee Rowley is also the 20th Construction Minister in the last 20 years, averaging 1 every 13 months. The lack of stability in the position is a long-term problem but it has clearly got worse in the last 5 years...
#ukconstruction #construction
... Unfortunately, government views the Construction Minister position as a 'stepping stone' position whereby, if you succeed then you get promoted to a higher-profile position or if you fail you get relegated (back) to the backbenches....
#ukconstruction #construction
Read 10 tweets
Sep 10, 2021
According to the ONS, construction output fell 1.6% in July 2021. It has fallen for 4 consecutive months & is 2.5% lower than in January 2020 although note the ONS appears to have issues estimating private housing output...
#ukconstruction #construction
ons.gov.uk/businessindust… Image
Looking across the sectors, the main contributors to the 1.6% fall in total construction output in July were private housing (-7.5%) & private housing repair, maintenance & improvement (rm&i) whilst the largest rise was in industrial (warehouses)...
#ukconstruction #construction Image
Looking at the evolution of construction output in the key sectors since Covid-19, infrastructure continues to go from strength to strength whilst industrial is rising sharply from a low base as warehouse projects are finally coming through &...
#ukconstruction #construction Image
Read 18 tweets
Sep 8, 2021
The key point from today's National Audit Office (NAO) report into the debacle that was the Green Homes Grant. BEIS initially announced it would retrofit 600,000 homes & yet it failed to even do 10% of that...
#ukhousing #energyefficiency #netzero
nao.org.uk/wp-content/upl… Image
... & note govt's terrible record of unrealistic announcements on retrofit & failing to deliver. e.g. With the Green Deal govt announced an ambition to retrofit 14 million homes & only 14,000 households used it...
#ukhousing #energyefficiency #netzero
publications.parliament.uk/pa/cm201617/cm… ImageImage
... & the critical point is if government is really serious on energy-efficient retrofit there needs to be realistic long-term policies with time to gain momentum with financial incentives to give households the incentives to spend & also...
#ukhousing #energyefficiency #netzero
Read 4 tweets
Jun 11, 2021
Construction output in April 2021 was 2.0% lower than March's recent peak (that was above pre-Covid-19 levels). Comparisons with a year ago are irrelevant given April 2020 was the nadir during the initial lockdown but...
#ukconstruction #construction
ons.gov.uk/businessindust…
... as a more appropriate reference point construction output in April 2021 was 0.4% lower than in January 2020, pre-Covid-19 so it remains a 'V'-shaped recovery for construction output so far compared with a 'W'-shaped recovery for UK GDP...
#ukconstruction #construction
Looking how the key sectors have evolved since January 2020, pre-Covid-19, there remains a distinct difference between the sectors in which activity is considerably higher than pre-Covid-19 (private housing rm&i & infrastructure), in contrast to...
#ukconstruction #construction
Read 12 tweets
Jun 10, 2021
UK construction products imports volumes from the EU in 2021 Q1 fell by 16.1% compared to 2020 Q4 & were 0.8% higher than a year ago whilst construction products exports to the EU in 2021 Q1 were 48.6% lower than in Q4 & 28.7% lower than a year ago BUT...
#ukconstruction #brexit
... note some very important caveats. These are inappropriate reference points given that 2020 Q4 was distorted (artificially high) due to stockpiling & 2020 Q1 was distorted (artificially low) due to an impact from initial lockdowns...
#ukconstruction #brexit
... A more appropriate reference point would be to compare with the average of 2016-18, prior to any Brexit deadlines in 2019 & 2020. Given the stockpiling in 2020 Q4, it is also worth while using the average of Q4 & 2021 Q1...
#ukconstruction #brexit
Read 8 tweets

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