On a quiet residential street in the south London suburb of Sutton, Deepak Singh Udassi is overseeing the finishing touches to a renovation project of the type that has long been the bread and butter of his specialist loft conversion company.
As the final fittings to a luxury bedroom and ensuite bathroom are made over the next two weeks, the scaffolding and skip will disappear from outside a mid-Victorian semi owned by a couple in their 50s. Rather than moving, they have decided to maximise its value by spending £65,000 on a loft conversion, one of the totems of the streetscape during Britain’s last boom.
But while Udassi’s work diary is full for the next few months, with several jobs around London, later this year he’s going to be taking measures to safeguard against potential recessionary storm clouds.
“We’re a traditional construction firm but we’re going to be drastically changing what we do. It’s in large part because of Brexit but we’re essentially being driven out of our sector,” said the 38-year-old, a former systems engineer who moved into the construction sector 15 years ago in partnership with a childhood friend. They employ six office staff and 25 onsite contractors.
One element of his plan is already taking shape in the form of his company, City Lofts London, diversifying by setting up an architectural practice. Another comes early next year when the company gets its teeth into a year-long luxury project as part of a pivot towards the more cash-rich, and stable, end of the market.
Like others in the sector, he’s found that his costs have “shot up” since 2016, with the cost of tiles and timber increasing by 20% and 15% respectively. At the same time, there has been a reduction in the number of skilled workers needed.
“A lot of the guys who worked for us are eastern Europeans. They’re sick and tired of being political footballs and the Polish economy is strong, so we have lost a lot of guys, who have gone home, and you know what? Good luck to them.” added Udassi.
More broadly, representatives of the construction industry paint a mixed picture of the environment in which their members are operating.
But as economists and political leaders hunt for the evidence that will help them plan for any future recession, there are clear signs that the construction sector is bracing itself for a downturn.
According to the Federation of Master Builders (FMB), an independent, non-profit trade association that represents 8,000 small- to medium-sized building firms, companies are already reducing their headcount of direct employees in favour of subcontractors who are easily removed if the work dries up.
The FMB’s most recent State of Trade survey showed that employment among construction SMEs had dropped for the first time in more than five years.
“Their thinking is that if the worst happens and a recession hits later this year, they need the size of their workforce to be flexible in order for their firm to survive,” said Arthur McArdle, the FMB’s national president. “However, this strategy is not without risk, as if construction bosses are employing more subbies, they might not always be certain of their quality. Rebalancing the workforce may seem like a good idea at the time, but it could lead to reputation-damaging mistakes.”
Another body, the Home Builders Federation (HBF). meanwhile. said however that delays in the planning process and a lack of available land were of more concern at the moment to its members, who account for 80% of all new homes built in England and Wales.
Buyer confidence was cited in March as a major constraint by only 7% of members of the Home Builders Federation (HBF), well down on the 48% who said it was a challenge of a similar scale at the end of last year.
Stockpiling, which has been taking place in other sectors ahead of Brexit, is meanwhile less of an indicator in the building trade. Smaller and medium-sized companies do not have the necessary storage space in the first instance. When shortages have occurred, such as problems in relation to bricks last year, they have been rectified relatively quickly.
Back outside his project in south London, Udassi agrees that shortages have not hampered his work. Where there was a shortage of a certain type of roof tile – one of the most commonly used – substitutes were found for example. But, he adds, “the writing is on the wall” for the future.
“Is our phone ringing any less? Probably not, because we have an established reputation and are London master builders. But we are being squeezed. We’re working a lot harder with essentially a lot less in our pocket to show for it.”
With a wife working in the corporate sector and two young children aged eight and six, Udassi also has his own family to consider and plan for. There’s a pause as he mulls over the main question.
“Do I think there will be a recession? It’s really hard to say. What I can say with a level of confidence is that there will be some form of downturn on 31 October. I don’t know how long and deep it will be but there will be a shock. Everybody knows that there is a cliff edge and something is going to happen one way or another.
“For us it’s going to be a question of riding out that period until things are back to normal again.”
Construction firms brace for recession as EU workers leave UK – The Guardian