Mixed messages for the construction industry

Last week the manufacturing sector was highlighted as the leader on the UK’s road to recovery (see the blog for more information), but today the construction industry comes into the spotlight.

Articles in this mornings papers paint very different pictures for the sector, which has often been seen as the worst affected by the recent economic issues.

The Sun reports 1,500 news jobs are to be created in the sector as a result of manufacturing growth in Northern Ireland. IDA Ireland says “ten firms need over 1.5million square feet of premises, mostly for manufacturing, that will lead to the jobs over two years.”

In contrast the Financial Times warns that the industry is shrinking further. It says “Construction will continue to decline this year, according to industry forecasts, as spending on public sector projects including the repair and maintenance of schools and hospitals falls sharply.”

Looking at the overall picture, it is a very mixed bag. Whilst public sector cuts continue constructions and repairs will obviously be lower down the list. However, as seen in Ireland, recovery in the manufacturing market and the retail sector will prove fruitful for construction firms.

Last week the Office for National Statistics reported a 1.8% rise in retail sales month on month. This follows plans to boost spending on stores from many of the larger supermarket chains.

Manufacturing – the key to UK recovery

Manufacturing companies are showing the greatest resilience to the weak economy and have increased their usage of temporary agency workers by 80%, year on year.

Research by insolvency experts Begbies Traynor found a 17% fall in “post-Christmas financial distress’ in 2012, compared to last year.

The figures relate to those with “critical” issues such as facing county court judgments totalling £5,000 or a winding up order, or “significant” problems, with court actions pending or out-of-date accounts. Print and packaging firms stress fell by 73%, food and beverage producers’ by 37%, and other manufacturing businesses by 49% year on year.

de Poel’s data from e-tips®, which processes the timesheets and invoices of temporary agency staff in the sector, shows that the usage of temps has increased by 80% year on year – supporting the research from Begbies.

Announcements such as Nissan starting manufacture of a new model in the North East, creating 1,125 jobs in the sector are likely to have buoyed confidence too.

Preparing for the Agency Workers Regulations in the Manufacturing Industry

The Agency Workers Regulations (AWR) offer serious repercussions for manufacturing firms, as they rely heavily on temporary staff to cope with demand during peak periods.

The Telegraph reports: “The manufacturing sector is expected to be the hardest hit, as car makers and food manufacturers rely heavily on temps to cover peak periods in demand and can lay them off when orders slow. Giving temps equal rights after 12 weeks in a job spoils any flexibility that comes with hiring them in the first place.”

The AWR could remove the competitive advantage temporary staffing provides, removing the benefits of reduced costs.

Charles Williamson, Chief Economist at Markit, stated his prediction: “The rate of growth in manufacturing has cooled very significantly since earlier in the year.”

“I think that despite AWR [Agency Workers Regulations] legislation, companies will continue to have workers on short-term contracts and see how the next few months go.”

This exemplifies that temporary workers are indispensible in times of economic turbulence in the manufacturing sector and many employers will continue to hire temporary workers.