Here at Refresh, we work with a number of construction companies. Whilst the past 18 months have proven challenging for the sector, construction is resilient and adapts quickly to changing circumstances. This can be seen in the UK Construction PMI for June 2021 which reports output growth achieving a 25 year high, while the latest IHS Markit data also shows output will expand 2.9% following last year’s staggering decline of 15.3%.
However, we should point out that sadly it’s not all positive news for the sector; there are a few storm clouds gathering on the horizon that could potentially cause problems for a continued surge in construction output.
So here is our roundup of the current situation including the positives and negatives affecting the industry, starting with some reasons to feel optimistic.
Areas of growth as the country starts to open up more
Whilst there have obviously been some sectors where construction has decreased, such as hospitality and leisure, there are other areas emerging as strong contenders for growth.
The warehouse and logistics sector is forecast to grow as the year progresses and is expected to continually expand right through to 2023. This has in large been bolstered by the growth in online retailing. As we all shop more online, we’ve generated a need for larger warehouse space. While this is positive for logistics, this is however currently impacting on the high streets and retail parks.
As we start to return to the office, new builds are expected to be slow to recover but on the flip side, refurbishment and fit-out projects are increasing as premises are being adapted to the changing working practices.
Government investment is expected to drive growth
Greater public sector investment is expected to be a major contributor to construction growth over the next three years. This is likely to be realised the most in the following areas:
Social housing which is expected to see renewed growth, particularly due to the increased investment from housing associations as a result of the Government lifting its requirement which limited rent increases to 1% below the rate of inflation.
Education where expansions in the form of extensions are propelling growth, rather than new builds, as local authorities address the problem of a shortage of secondary school places. Project start-ups are expected to fully recover from 2023.
Healthcare prospects remain positive as the NHS stays at the forefront of the political agenda. Following the Spending Review, NHS capital budget was increased for 2021/22 to £6.2 billion with an extra £20 billion committed over the next five years.
Civil engineering is being boosted through major infrastructure schemes such as HS2, the Thames Tideway, Hinkley Point and the Stonehenge Tunnel. Glenigan’s July Forecast is already indicating that infrastructure has been the strongest performing new work sector, at 8% up on a year ago.
