More than two-thirds of respondents to CN’s Q1 Barometer say clients are considering delaying or cancelling jobs due to cost increases.
This is not news to CN readers. We have revealed several high-profile instances of cost hikes on schemes worth hundreds of millions in recent weeks.
When you take jobs that were priced 12-18 months ago but only now coming to site, it’s no surprise to hear clients are getting the jitters. But workloads are currently strong, so one-off schemes being delayed here and there aren’t likely to cause too much upset.
Contractors are already looking further afield, warning that 2018 is going to be tough, particularly in residential and commercial property. Major infrastructure will dominate the latter part of this decade, so those with a balanced portfolio will likely be able to ride out the storm.
But when coupled with uncertainty over the EU referendum, it’s exceptionally difficult to call the market at present.
One Barometer respondent sums it up: “We are in uncharted territory – if anyone tells you they know where the industry/economy is going, they are lying… [this] makes it hard to plan and therefore hard to invest.”
“Money being diverted elsewhere in Europe if the UK leaves the EU is a genuine fear”
Most construction companies are refusing to take a public stance on the EU vote, happy to sit on the fence. But in this instance it’s not due to their traditional reticence to speak out. Several contractor CEOs have told me recently that they can’t foresee a huge impact either way when it comes to their business models.
But don’t confuse ambivalence with apathy. They are carefully monitoring investor sentiment, with people like Grosvenor chief executive Mark Preston saying this week that investor interest in offices and flats has “chilled” due to the referendum.
Money being diverted elsewhere in Europe if the UK leaves the EU is a genuine fear for businesses. On the flip side, to convince businesses of the case for backing Brexit, justice secretary Michael Gove will probably need to go further than his comments this week that it would be “galvanising, liberating… a moment of patriotic renewal”.
If the UK votes to Remain, the chances are we’ll see the Scottish referendum effect, things getting back to relative normality after a period of uncertainty. The impact of a vote to Leave? Well, that’s far harder to quantify.
In the meantime, keep getting your CN daily news alerts as we monitor investors and projects for any signs of delay.