Northern housebuilders shrugging off the uncertainty
WE ARE seeing mixed signals about the UK economy with worryingly sluggish growth in the dominant services sector, which sank to its lowest level in nearly a year last month.
The closely watched Markit/ CIPS services purchasing managers’ index report said slow growth in new business sent activity in services to its lowest level since September 2016.
The slowdown in services, which accounts for around 80 per cent of the UK economy, will send warning signals about the health of the UK.
The worst hit areas have been hotels, restaurants, cinemas, gyms and hairdressers as consumers cut back on nonessential spending amid higher inflation and weaker wage growth.
On a brighter note, business confidence reached a threemonth high, but the level is lower than before Britain voted to divorce from the European Union last year. The Office for National Statistics confirmed last month that Britain delivered the slowest growth out of the G7 group of nations in the second quarter, expanding by just 0.3 per cent between April to June.
It came as household spending slumped to its lowest level in nearly three years.
However, while services are in the doldrums, manufacturing is booming thanks to the fall in the pound.
UK factories pushed to a fourmonth high in August according to official data.
The number of factories which saw output increase touched an all-time high of 34 per cent in the third quarter, according to data from BDO and manufacturing body EEF.
Order books also touched record heights on stronger overseas demand and 47 per cent of companies saw exports to the European Union grow.
Lee Hopley, EEF’s chief economist, said manufacturing firms are “making hay while the sun shines”, but she expects growth to stabilise in the coming months.
She added there is little doubt that Brexit is likely to weigh on sentiment over the next 12 months with uncertainty over the UK’s terms of exit.
Meanwhile, the construction sector unexpectedly slowed to a one-year low in August as new business slumped for the second month in a row.
The PMI report pointed to a lack of new orders as the trigger for the slowdown, with a healthy performance from housebuilding being countered by the sharpest drop in commercial development since July 2016.
There is one area that remains resoundingly robust – Northern housebuilding – as we have seen by the robust growth of housebuilders with a sharp focus on Yorkshire and the North.
Earlier this week Northern housebuilder Avant Homes announced plans to expand beyond its South Yorkshire base and into other parts of the county as it meets rising demand for houses worth under £200,000.
At the moment the group is focused on its South Yorkshire and East Midlands heartlands, selling houses for an average of £255,000 and it sees a lucrative market beyond this niche.
It plans to take on the big housebuilders like Persimmon and Taylor Wimpey, which are doing very well in that part of the market.
Despite dire warnings about the housing market Persimmon, Yorkshire’s biggest listed company, recently announced a big rise in half-year profits and strong demand from customers for its traditional style houses.
The York-based firm has seen no sign of any Brexit impact as high employment levels are supporting a market that is seeing strong demand for new homes, mitigating the impact of rising inflation.
Persimmon’s relatively low house prices (the average is £213,000) and its clear focus on the regions have boosted trading.
While the outlook for many parts of the economy looks bleak at the moment, Northern housebuilders are keen to expand and meet strong demand in their areas.
There will be winners and losers as the economy shows signs of trouble ahead, but the North is doing what it does best – getting on with the job.