Landscape market update: How ongoing Brexit uncertainty is impacting the sector

Hotspot: Gateshead Quays - Gateshead Council, Ask Real Estate, PATRIZIA, HOK
Hotspot: Gateshead Quays - Gateshead Council, Ask Real Estate, PATRIZIA, HOK

Warnings against a no-deal Brexit have continued to dominate business headlines as the British summer gets underway - with both Conservative leadership candidates, Boris Johnson and Jeremy Hunt, saying no-deal remains firmly on the table.

The country is in limbo, waiting to see who will be crowned prime minister by Conservative Party members -  and when - or even if - we leave the EU.

But how is the ongoing uncertainty impacting the landscape market? 

In the built environment, the current picture is mixed and varies according to geography. However there is little doubt continued Brexit-related uncertainty is impacting on decision-making. 

Chief executives and owners are now reporting better landscape construction business opportunities on the ground in the north than in the south which is slowing after many years on top. 

"It’s not just the south east anymore. Business has moved up north," says Crowders Nurseries owner Robert Crowder. "It’s in the North East, North West and South West. The market is more buoyant around the country. There’s also a lot of infrastructure works going on around Northern Ireland.

"From our point of view it’s better spread than it was, people are buying a wider range of plants and more of the regions are doing better." 

Chief executive of landscape trade body BALI, Wayne Grills, agrees, saying: "The North West seems to be quite buoyant, especially on the domestic side. Yorkshire and the North East are other areas."

North-south divide 

This geographical trend looks set to continue. The Royal Institute of British Architects (RIBA) is reporting a "subdued" market in architecture, but with a marked north-south divide. 

In its latest RIBA Future Trends Workload Index, which covers April 2019, architects reported a +5 score for workload on average for the third month, indicating a modest positivity about future business. London practices have become more downbeat, with a -7 figure. 

However, practices in the Midlands and East Anglia (balance figure +9) and Wales and the West (balance figure +14) were more positive, while the North of England continued its run of optimism, returning a balance of +20.

Designing schemes does not mean they actually get built, however. Landscape contractors are reporting a lot of interest from clients but they are hanging back when it comes to green-lighting projects. 

Nurture Landscapes managing director Peter Fane says: "Construction is struggling with getting people to make decisions — commitments. There's lots of things to price, lots of things priced. The pipeline’s bigger than it's ever been. 

"Getting people to make decisions is tough. Funnily enough, we're getting decisions in the north and the northern construction side is doing very well. The south is stable, but we're just we're waiting for projects to come in for the back end of the year and 2020."

Fane sees Newcastle, Blackburn and Teesside as strong areas. Other landscapers also say the North West and North East are strong. One reason for northern buoyancy may be a lack of competition, Fane posits, with "so many big, very good players in the south".

He adds: "Brexit is making people hesitate and that's the trouble. People are hesitating, not committing and, until it’s solved, they’re going to hesitate."

Gavin Jones senior contract manager John Crouch adds: "We have so many opportunities but everyone’s a bit nervous. They just say they haven’t made a decision yet."

Landscape Institute chief executive Dan Cook agrees. "There's no doubt there's a lot of uncertainty out there," he says. "The early part of this year, things had gone a bit quiet as we got closer to the Brexit date. Because we have got a skills shortage in our sector, that means that a lot of our businesses in the sector are quite busy, particularly in London and the South East. There's a lot of housing work, highways and rail work, major infrastructure. But there’s still uncertainty out there when you go to talk to people."

Lack of clarity

RIBA head of economic research and analysis Adrian Malleson says the lack of clarity around Brexit dominated the responses to RIBA's survey. "The subdued nature of the market for architectural services is highlighted by the number of architects reporting that a lack of work over the last month has led to them being personally underemployed.

"The tone remains one of frustrations as the ongoing and indeterminate Brexit debate maintains high levels of uncertainty within the architectural community, as well as the wider construction industry. Not all architects are downbeat, however. Some tell us of the strength in the regions and of the relative resilience of the housing market."

Cook agrees that the pipeline of housing work continues to flow. "There’s also work coming through the Government’s High Street Renewal Fund. We're excited to do more in the urban design space. There's a recognition that there's a real challenge of getting the future mix of high streets right.

He adds: "We're working with the Institute of Place Management. If people want to do place-making well, then that involves landscape. People are increasingly seeing the health and well-being benefits of quality landscape, things like pocket parks in town centres are good for business. Also, many of our members work closely with local business improvement districts and town centre managers."

The latest Office for National Statistics construction figures, published this month (June), show construction output increased by 0.4% for the first quarter of 2019, but this increase was mostly driven by repair and maintenance work, which grew by 1%, with non-housing repair and maintenance increasing by 2.3%.

New construction work experienced minimal growth — 0.1% in the three months to April 2019 — with the growth in infrastructure (3.6%) and public new housing (4.7%) being counterbalanced by falls in private commercial new work (-2.2%) and public other new work (-2.3%).

Architects were upbeat about the continued strength of the private housing sector in RIBA’s survey. The forecast was +4, while the commercial sector slipped back into negative territory to -1 (from +4). The community sector also dropped into a negative balance score of -2 (from 0) and the public sector also reverted to -3.

Housebuilding has been supporting landscape build and plant buys for eight years and is "still going strong", according to Crowder. "But what's happened more recently is that other sectors have picked up, particularly infrastructure. The Government announced a lot of money on road and rail. The commercial sector is quite buoyant — the big shed builders or office developers." Sports and leisure is also a strong sector, with Premier League football clubs "spending a fortune on training grounds and consulting". 

Landscape selling power

It is not just the volume of residential building that is significant. There is now more appreciation for the selling power of high-quality landscapes. Gavin Jones senior contract manager John Crouch says: "Before we’d be involved in the infrastructure. We put in three or four big trees and a bit of turf, and the actual plots were left to themselves.

"Now we are doing instant hedging and the front garden and wrought-iron fencing. It’s good, high-value work. They’re looking at landscape and thinking, hold on, this is important, it’s a selling point." Social media is a factor, he adds. "If you don’t do things properly and right, then they’re on to you straight away, and nobody wants that feedback."

Competition for buyers is driving this trend, says Crowder. High-end developers are paying for beautiful landscapes now "because they want people to want to live there", he explains. "It’s a point of difference. The Berkeley Group are doing some amazing projects." People who spend more than a million pounds want to feel like a million dollars as they enter their development, he adds. 

York hardy nursery stock grower Johnsons of Whixley has worries about a no-deal Brexit. According to its latest accounts, gross margin reduced by 1.4% because of reduced margin on the sales of plants associated with supplier price increases and increasing payroll costs. While the reduction was not a concern, those pressures are likely to be "exaggerated if the UK leaves the EU without a suitable leaving arrangement in place".

While the nursery has substantial on-site production, it cannot grow every plant demanded by customers, so "Brexit and the supply of northern European stock remains the single biggest threat to our business". To continue supply post-Brexit, "lead times and costs will inevitably increase". Inventory levels increased because of the threat of a no-deal Brexit.

Grills says there is a place for client education. "It’s the clients that want the instant landscapes and big trees, and most of that has to come from abroad," he notes. But he says BALI members "don’t seem to be worried" about Brexit.

"There’s a caution in the market, without a shadow of a doubt." But he says after delays of up to 18 months following the Brexit vote, some projects have now got going in the past three or four months because clients had waited long enough. "There’s been a new surge in the market," he says. 

Meanwhile, the skills shortage is not going away anytime soon, with a hard or no-deal Brexit making it harder to attract talent. Both the Landscape Institute and RIBA are concerned about staffing and successfully lobbied the Migration Advisory Committee to put architecture on its "shortage occupation" list.

RIBA calls this "a positive development for architects trying to navigate the UK’s complex and burdensome immigration system". However, both institutes are urging the committee to drop its £30,000 suggested salary threshold for a tier two work visa.

"The number-one issue for us is talent and skills shortages," says Cook. "We ran a campaign to get employers in our sector to submit evidence to MAC. We are seeking to influence the Government with evidence of skills shortage and salary levels to get changes to policy on the basis of our recent talent surveys and evidence from employers." 

Lack of talent is a risk to the profession in the future, alongside big infrastructure projects that get cancelled, he adds. "General economic decline, that does have an impact in the future. We're not seeing a major downturn but there are early signals."

Crowder says: "I think there's a lot of pent-up demand with people just hesitating and pressing the green button because of Brexit. When it goes either way, I think there will be a flood of new work. It doesn't matter which way Brexit goes, they'll be a glut of new work. A lot of pricing’s been done but decisions have been tougher. So I think as soon as we've got a green light on Brexit we'll get a green light on a lot of these projects."

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