RISING costs and uncertainty relating to Brexit are to blame for the sharp drop in output growth in January 2019, the Federation of Master Builders (FMB) has said in response to the latest Purchasing Managers’ Index data (PMI).
The Chartered Institute of Purchasing and Supply (CIPS) Construction Purchasing Manager’s Index incorporates survey results provided by construction firms throughout the country.
A reading above fifty suggests the construction sector is expanding, while a reading below fifty suggests the construction sector is in contraction.
The January 2019 PMI data revealed a fall from 52.8 in December to 50.6 in January, against the neutral reading of 50.0. January data pointed to a loss of momentum for the UK construction sector, with business activity growth grinding to its weakest for ten months.
All three categories of construction output recorded weaker trends than those reported in December.
Residential work was the strongest performing area, although the latest expansion was only modest and the slowest seen since March 2018. Civil engineering activity increased marginally, with the rate of growth much softer than December’s 19-month high.
Commercial work was the weakest performing area of construction output in January. Latest data indicated a decline in work on commercial construction projects for the first time in ten months. Anecdotal evidence suggested that Brexit-related anxiety and associated concerns about the domestic economic outlook continued to weigh on client demand.
New business growth eased to an eight-month low in January.
Construction firms widely commented on softer demand conditions and longer sales conversion times, reflecting a wait-and-see approach to spending by clients. Concerns about the near-term outlook for new projects resulted in more cautious staff hiring policies at the start of 2019. The latest survey pointed to the slowest rise in employment numbers since July 2016.
However, construction firms remain positive about the outlook for business activity in 2019. Around 41% of the survey panel anticipate a rise in output, while only 16% forecast a fall.
Optimism had, however, fallen month on month. Large-scale civil engineering projects were cited as a key source of optimism, while Brexit uncertainty was the most commonly cited concern.
Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey: “UK construction growth shifted down a gear at the start of 2019, with weaker conditions signalled across all three main categories of activity.
“Commercial work declined for the first time in ten months as concerns about the domestic economic outlook continued to hold back activity.
“The latest survey also revealed a loss of momentum for house building and civil engineering, although these areas of the construction sector at least remained on a modest growth path.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said: “The sector suffered a sharp drop in output growth in January, and the softest rise in purchasing volumes since September 2017, as Brexit continues to hamper progress and dampen client confidence.
“The biggest shock came in the form of job creation which has managed to suffer the slings and arrows of Brexit highs and lows with solid hiring since the referendum result. Employment rose at the slowest rate since July 2016 and with optimism also in short supply, the sector only needs a small nudge to tip it closer to a recession.”
Commenting on the results, Brian Berry Chief Executive of the FMB, said: “The latest PMI data show a slowdown in growth in construction with business activity growth easing to its weakest for ten months. The ongoing political uncertainty is partly to blame for this setback.
“Political uncertainty is the enemy of construction firms that rely on the spending power of homeowners to commission home improvement projects. The UK is set to leave the EU next month, and yet we are still none the wiser about what the future holds. Given these intense headwinds, it should not be surprising that the sector suffered such a sharp decline.”
Mr Berry continued: “Alongside the political uncertainty, the cost of doing business is also rising for construction firms up and down the country. Material prices have been rising steadily since the depreciation of sterling following the EU referendum.
“Looking ahead, material prices are expected to continue to cause a headache for the construction industry with recent research from the FMB showing that 87% of builders believe that material prices will rise in the next six months. What’s more the construction skills crisis means that key trades are extremely difficult to recruit and the upshot of this is rising wages in construction.
“Tradespeople know they can command higher salaries than they did previously as workers are scarce, and this means a squeeze in margins for firms. This will only worsen if the post-Brexit immigration system that the Government has planned goes ahead.
“If the sector isn’t able to draw upon crucial EU workers of all skill levels, who have so far served to mitigate this shortage, the slowdown of growth will continue.”
Swansea Building Society’s new flagship branch exceeds expectations in first year
The performance of Swansea Building Society’s new, flagship, branch, which opened in Swansea city centre in January 2019, has exceeded all expectations in its first year of trading.
The new branch, on Portland Street, was opened to complement the Society’s head office on Craddock Street and offer customers a more central location to visit the building society. It was hoped it would generate new customers and growth.
This has proved to be the case. Some 1,422 new savings accounts with balances of £21.5 million were opened through the new branch in 2019. Of these, 1,236 were brand new savings customers generating balances of some £19.2 million.
Mortgage balances also enjoyed a positive uplift: some £19.2 million of net mortgage balances were lent in the SA1 and SA4 to SA13 post code areas covered by the new Portland Street branch in 2019.
Jane Parker, branch manager, said: “This represents an excellent performance which positively rewards the Board’s investment in the new premises. We are all extremely proud of the new branch which offers instant access savings accounts and a personal approach to mortgage lending with its focus on niche mortgage products.
“It also confirms there is truth in the old adage: location, location, location. We are thrilled to be located in the heart of the financial district of the city centre and our achievement to date showcases the fact that the Society’s personable, face-to-face business model truly works. Our main focus is to serve the community in a traditional manner. As such, we offer tailor made mortgage products to benefit customers who may find it difficult to be accommodated by other High Street Lenders.”
The new branch is very accessible with members of the public are encouraged to come and speak to the staff without a pre-arranged appointment.
Parker added: “People call in to our smart, friendly environment which offers enhanced facilities for the disabled and a variety of bright, airy, meeting rooms for increased privacy which is definitely appreciated by customers both old and new. The branch has helped improve brand awareness and creates a significantly positive impression compared to some of other city centre empty and deteriorating high street buildings.”
Swansea Building Society’s continued emphasis on the community has been further enhanced by its recent three-year partnership sponsorship with Swansea City Football Club. “We feel we are firmly set on a positive path for continued growth and prosperity,” Parker said.
Jobs at risk as Mothercare goes into administration
PARENTING retailer Mothercare has announced plans to put its UK business into administration affecting local branches including Cardiff and Swansea.
The company said it will file a notice to appoint administrators, casting a shadow over the future of its 79 UK shops and 2,500 employees.
Mothercare has already gone through a company voluntary arrangement (CVA), which allowed it to shut 55 shops. The planned administration also affects Mothercare Business Services Limited (MBS), which provides certain services to Mothercare UK.
Mothercare said: “These notices of intent to appoint administrators in respect of Mothercare UK and MBS are a necessary step in the restructuring and refinancing of the Group. Plans are well advanced and being finalised for execution imminently. A further announcement will be made in due course.”
Only 500 of the jobs at risk are full-time posts, including head office roles, with 2,000 part-time.
The main branches expected to be affected in south Wales are Cardiff and Swansea, where many could become jobless at this sudden news.
Mothercare has been looking for a buyer for the UK stores, but with no success so far.
The company also operates in more than 40 overseas territories, which are not subject to administration. In the financial year to March 2019, Mothercare’s international business generated profits of £28.3m, whereas the UK retail operations lost £36.3m.
However, in its prime Mothercare had hundreds of stores. It was the go-to place for new parents but sadly it failed to keep up with the public’s changing shopping habits. Mothercare’s UK sector has been loss-making for years. One big reason is there’s so much more competition these days.
Here are some of the key moments in the decline of the well-known retailer:
1961 – Mothercare is founded by entrepreneurs Selim Zilkha and James Goldsmith.
1986 – The company becomes part of the Storehouse group after it merges with homeware business Habitat and British Home Stores.
2000 – The company reverts to the Mothercare brand after the BHS and Habitat businesses are each sold off separately.
June 2007 – The retailer purchases the Early Learning Centre chain of children’s stores for £85m. By now, Mothercare has grown to more than 350 outlets in the UK.
2017 – The retailer has seen a steady decline in sales following the financial crisis, resulting in a number of profit warnings and a steady stream of store closures. By November, the company has 152 UK stores and warns over the “softening UK market” as half-year losses widen on the back of sliding high street store sales.
May 2018 – Mothercare secures a Company Voluntary Arrangement (CVA) restructuring deal which it says will lead to the closure of 50 stores and affect 800 jobs. The retailer says it has also agreed rent reductions on another 21 stores as part of the move.
July 2018 – Mothercare announces a £32.5m fundraiser at 19 pence per share (more than double its current value) to gather proceeds to pay off its significant debts.
The company also says it will close more stores than previously indicated, forecasting a rise to 60 closures, although this eventually results in 55 sites shutting their doors.
December 2018 – The retailer sells and leases back its UK head offices, bringing in £14.5m, as sales continue to fall in its UK high street stores.
March 2019 – Mothercare announces plans to sell the Early Learning Centre toy business to rival retailer The Entertainer for £13.5m. The group says the sale is the “next step towards being free of bank debt”.
July 2019 – The children’s goods business issues a profit warning after it sees UK profit margins improve slower than forecast due to the difficult retail backdrop, despite the major restructuring and cost-saving efforts.
UK sales are decimated by the raft of closures, driving total UK sales down by 23.2% for the 15 weeks to July.
November 2019 – Mothercare’s parent business says it will file a notice to appoint administrators for the UK business as it can no longer “satisfy the cash needs” to keep it afloat.
New job market data has also revealed a downward spiral for the retail sector as a whole, with available vacancies in the retail sector plummeting by -25% in the last 12 months.
According to data from Adzuna, a leading job search engine, the retail industry has lost a quarter of all vacancies in the past 12 months (a loss of 7,298 jobs) with a -13% decrease of jobs month-on-month. August 2019 shows the largest month-on-month decrease since May 2017.
Splitting this loss out into different roles, the data reveals vacancies for management positions in retail have fallen by 30% compared to this time last year, with vacancies for retail apprentices dropping by 55% and retail operatives dropping by 23%.
The average salary across the industry (£26,284 pa), has only seen a 0.7% increase in the last three years, despite the average inflation rate being 2.62%¹. The current average sits 23% below the national average of £34,164.
The top five companies hiring for retail jobs in the UK are:
Tesco – 1,275 jobs
Dixons Carphone – 952 jobs
Halfords – 401 jobs
Greggs – 351 jobs
Sainsbury’s – 334 jobs
The data also looked at the job market at a whole, revealing that across all industries, the North East of England saw the biggest loss in job vacancies (-46.3% year on year) in the last 12 months.
Shares in the parent company Mothercare dived by 29.2 percent to eight pence in early trading on Monday amidst the tough retail climate and one thing is for sure, Mothercare’s days are numbered.
National Children of Wales Awards unveils sponsors
THE INAUGURAL National Children of Wales Awards has unveiled a list of high-profile sponsors, who have committed to support and deliver the event through to its climax on April 3, 2020.
The Trade Centre Wales, one of the largest and fastest growing used car companies in the UK, and Bidfood, one of the largest food wholesalers in the UK, have committed to support the event as headline sponsors.
Mark Bailey, Chairman of the Trade Centre Wales, said:
“We are extremely proud to be supporting the inaugural National Children of Wales Awards. It is hard to envisage a more befitting event, closely aligned with our ethos and values, than recognising the contribution of children within our great nation.”
Nick Sullivan, Head of Freetrade Sales at Bidfood UK, commented:
“We are honoured to be part of a project that shines a light on tremendously brave children and young people who regularly face hardships and challenges in everyday life. Community engagement is extremely important to Bidfood as a business, which is why we make it part of our mission to regularly support our local communities across Wales.”
Meanwhile, the event has secured the support of a number of other companies as category sponsors. These companies are: Joe’s Ice Cream, RedKite Solicitors, 1192 Laser & Beauty Clinic, Forrest Print, Iceland Foods, Princes Gate, Andrew Rees & Sons Butchers, MGY, Principality Building Society, Barclays, Mitre Linen, Thomas Recruitment Group, PwC and Bibendum Wine.
The event is working with a number of other companies to provide support to the award winners. Packages are available to help fund a stay at the Bluestone Resort, and at the Celtic Manor on the evening of the event.
The National Children of Wales Awards was founded and launched by Blanche Sainsbury, chair of Bluestone National Park Resort and the Bluestone Foundation, the company’s charitable foundation.
Fifteen award categories will focus on diversity, bravery, courage, sporting achievements, and children who help others through championing causes, caring and fundraising. Full details of all the categories and how to enter can be found at the website: www.nationalchildrenofwalesawards.org
The organisers aim to raise £100,000 at the event, which will be distributed to charities in Wales dedicated to helping children. The Teenage Cancer Trust, Dreams & Wishes and the National Society for the Prevention of Cruelty to Children (NSPCC) will all benefit from the event, as will the Bluestone Foundation.
The Bluestone Foundation works with many local charities in Pembrokeshire, while the Bluestone National Park Resort has, for many years, aided charities including Dreams & Wishes, which helps seriously ill children enjoy precious holiday time with their families.
Blanche Sainsbury, chair of Bluestone National Park Resort and founder of the National Children of Wales Awards, said:
“The support of the local business community so far has been fantastic and exceeded our expectations. The fact is, that without this support, these awards would simply not exist. We are very grateful for those that have committed so far, but we are still seeking more companies to work with and also seeking prizes for the auction. I would urge anyone interested in getting involved in these awards to contact us.”
Anyone interested in sponsoring the awards, buying a table or donating an auction prize, please contact Mark Hillary at: firstname.lastname@example.org