We’re coming out of spring and heading into summer, meaning warmer days, longer evenings and the positivity that comes with a feeling of having more time in the day. So, what do we have to look forward to for the rest of 2016?
A deal of uncertainty mixed with a degree of stability would seem to be the order of things. The stability comes from fairly full order books, some improved margins and perhaps not the massive skills shortages we have all been predicting. The Construction Products Association (CPA) is still predicting strong growth through 2016 and 2017. Although slightly reduced at 3.6 per cent, this is still pretty good by any standards. Yet we seem to be surrounded by uncertainty and I heard the “R word” used by a member for the first time in a long time recently. At least “the threat of recession”, anyway, as they bemoaned the lack of go-ahead on a number of projects due to “uncertainties”.
So, what are these uncertainties?
Well, the rest of the world does not seem to be doing so well. The Chinese economy is slowing, the EU is flat, with negative interest rates at the European Central Bank to try to stimulate growth. The oil price is hampering the Middle East and Russia. This has reflected in reduced corporate profits in companies worldwide: the S&P 500 are expecting 6.2 per cent lower profits than last year. That in turn translates into lower capital expenditure, which fell by 10 per cent in 2015 and is expected to fall further in 2016. Lower capital expenditure means fewer building projects.
This also manifests itself in the high-end residential market, which, in London at least, is starting to see a correction in sales and price as too many new two-bedroom flats valued over £2 million come onto the market.
Then we have political risk. Obviously, the uncertainty over Brexit will play out until the referendum but will undoubtedly have political consequences after the poll, whatever the result. We have the US election in November, likely to be the most acrimonious in living memory. Depending on the victor, we’ll either see the world’s largest economy and superpower following a more dynamic role as a world leader or falling back into a more insular protectionist posture. In Germany, Angela Merkel is under increasing pressure over her open-door policy to migrants. Then we have President Putin who is likely to choose foreign policy exploits to distract from the perilous state of the Russian economy. Pretty much everywhere you look there is uncertainty.
Yet the UK economy continues to buck the trend, grow and attract foreign investment. There is much to be said for democratic government and institutions that are free from corruption and widely seen as fair. In times of uncertainty, where does the world want to keep its money safe?
So, there is good reason to remain optimistic. Who knows, in a world where Leicester City can still win the Premiership (at the time of writing!), only good things can happen.
David Frise
FIS chief executive
www.thefis.org
