Contraction in construction

Whilst spring heralded signs of recovery in large swathes of the economy, the construction industry continues to buck the trend. Even admitting that the poor weather at the beginning of the year won’t have helped, construction statistics continue to give cause for concern.

Starting with the general picture, although the UK as a whole returned to growth in the first quarter of 2011 with a rise of 0.5%, construction stood out with a 4.7% contraction. More recently the purchasing managers index (PMI) for construction came in at 53.3 in April compared with 56.4 in March. Even though anything over 50 demonstrates some growth, with the warmer weather in April and the slow upturn in UN confidence, industry analysts were hoping for a mark of at least 55.5 in April.

Looking at the two elements of construction, private housing and business premises, the picture is mixed. We had good news from the Council of Mortgage Lenders indicating a 21% rise in gross mortgages in March. However various commentaries since then have been mixed with experts undecided on whether prices are rising, falling or are likely to remain static for some time to come.

Within the business sector a return in confidence will lead to the demand for fresh premises. However with many projects having been partially completed and then put on hold due to the recession the market may not be ready yet for major construction works.

Apart from interest rates which are now expected to remain at 0.5% for some months to come, one of the main drivers behind any demand for construction is cost control. With Stamp Duty Land Tax (SDLT) now at 5% for properties over £1 million those who can mitigate all or part of the tax are more likely to be the ones driving the marketplace forward.

As tax mitigation specialists Newshams are able to give advice on SDLT, how it may affect any private or business transaction and how to put in place an effective mitigation strategy.

Contact us now on 020 7470 8820 and ask to speak to a tax adviser about how we can reduce the tax costs on your corporate transaction or e-mail us at and we’ll get straight back to you.

10th May 2011

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