UK growth expected

The UK’s Construction Products Association is expecting growth of 19.0% for the £111 billion (€130.3 billion) UK construction industry by 2017 – an upward revision from the summer which it said reflected an increase in activity.

It added that this would boost UK GDP by an additional £20 billion (€23.5 billion).

And the latest RICS (Royal Institution of Chartered Surveyors) construction market survey has found that housebuilding in the UK is continuing to rebound with chartered surveyors across the country reporting growth.

Noble Francis, economics director of the Construction Products Association, said, “Construction is set to enjoy growth over the next four years as it recovers from its worst recession in over 35 years. This is mainly due to private housing, which is experiencing a rapid rise, and infrastructure, which is seeing a more gradual return to positive territory.”

He explained that the private housing sector was being helped by recovery in the wider economy and the impacts of policies including the UK government’s Help to Buy scheme, which have driven both house prices and housebuilding.

“This is expected to lead to private house starts increasing 19.0% in 2013 and 15.0% in 2014, albeit from historic low levels of house building,” said Francis.

Uncertainty

He felt that although rapid growth was predicted over the next 18 months, uncertainty remained around what would happen when the policies ended, given that the housing market was unlikely to be self-sustaining by then.

“The infrastructure sector is recovering from a very difficult 2012, when output fell 12.7% despite numerous government announcements of boosts to the sector,” he said. “Government now appears, however, to be refocusing capital investment towards repairs and renewals.

“In addition, work on Europe’s largest construction project, Crossrail, is expected to peak over the next 18 months. As a result, growth of 7.4% is forecast in 2014.”

For the longer term picture, he predicted that the prospects for infrastructure would be reliant on investment in the replacement of energy capacity across nuclear, offshore wind, gas and shale, “all of which remain uncertain”.

He said, “Driven by this investment, we predict the sector will enjoy further growth of 27.9% between 2015 and 2017.”

Francis said that two other sectors figured prominently in the Association’s forecasts.

“First, work in the largest sector of commercial – offices and retail – remains one-third lower than its high in 2007. Second, public sector construction, which accounts for one-third of total industry output, continues to constrain overall growth.”

He summed up by saying, “After suffering from an extremely tough market for over five years, and acting as a drag on UK economic activity, construction is set to grow every year between 2014 and 2017. This should provide a considerable boost to the wider economy.”

Housebuilding

RICS latest survey of housebuilding shows it is continuing to rebound with chartered surveyors across the UK reporting growth.

During the third quarter of the year, a record net balance of 41% more respondents reported rises in privately-funded housing projects compared with the previous period, up from 31% in the second quarter.

RICS said that significantly, this was the first time that every part of the country had reported growth since the beginning of the market crash six years ago. It added that this demonstrated that the long-awaited upturn in numbers of new homes might finally be under way.

The overall construction sector saw a welcome boost during the three months to September, it reported, with workloads rising at their strongest rate since the summer of 2004 – a net balance of 31%.

It said that alongside housebuilding, this growth was largely driven by private commercial and industrial developments, as funding finally began “to filter through to actual shovels in the ground”.

It said, “This will prove welcome news to an economy that has seen construction struggle considerably for some time.”

As the summer months drew to a close, there was also good news for employment prospects with a net balance of 49% expecting more jobs to be created in the sector over the next 12 months.

“Worryingly, however, this improving picture for employment is already being reflected in a jump in reported skill shortages, highlighting the potential for capacity issues if the recovery continues to gather pace,” said RICS.

“Significantly, surveyors are expecting a sharp acceleration in business activity during the next 12 months. A net balance of 71% of respondents see the volume of work picking up speed, with output likely to rise by close to 4% over the period. This optimism was also reflected in positive predictions for company profits as the sector begins to dig its way out of the downturn.”

Simon Rubinsohn, RICS Chief Economist, said, “While it’s certainly good news that construction – and especially housebuilding – is finally on the rise right across the UK, we are certainly not out of the woods yet.

“Critically, we’re still way behind in terms of building enough homes to meet the nation’s growing housing need and overall construction projects are at a historical low.”

Rubinsohn added, “In the face of this challenge, it is a particularly concerning that we are already receiving reports of some skill shortages as well as capacity constraints for some building materials such as bricks.”