The current situation for UK construction - and what the future holds
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.
Confidence in this sector has been further boosted by a record investment being pledged by the government. This includes £5 billion to accelerate the roll-out of 5G broadband and £27.4 billion spend from 2020 – 2025 to build new capacity as well as improve the quality of existing roads.
Emerging in summer 2021
As we mentioned at the beginning of this blog, there are some emerging issues that could have an impact on this continued recovery, the main ones to monitor being:
Materials shortages leading to delays in project completions and increased costs.
Increased construction activity has resulted in greater pressure being put on the supply chain. This is creating extended lead times for materials and is inflating prices which has prompted the Construction Leadership Council (CLC) to warn that prices of materials such as timber and fabricated steel could continue to rise throughout the year. Other materials in short supply include roof tiles, bagged cement, plaster and plasterboard.
This shortage of supplies could be in part due to increased construction work following lockdown easing, factory shutdowns during pandemic restrictions as well as the current problem of skilled labour shortage.
A shortage of hauliers could impact on materials and site deliveries
According to the Road Haulage Association (RHA) a shortage of HGV drivers as a result of Brexit, increasing demand for services and the loss of 12 months of training as tests were stopped during the pandemic is hitting crisis level. It is estimated that some 15,000 hauliers have left the UK because of Brexit and around 30,000 HGV driver tests were postponed during the coronavirus pandemic.
This means there is a delay in delivery of materials to sites due to the lack of lorries which is having a knock on effect on project schedules and build costs.
The Government’s short term solution of extending drivers’ hours from 9 to 10hrs a day has not been met with enthusiasm by the RHA which fears this will be dangerous for drivers and counterproductive as it will put people off the profession.
You can still “Read all about it!”
As our business is about communication, we naturally work closely with the construction sector media. When industries struggle, we often see a shift in publishing practices, and as companies tighten the reigns on advertising spend, it’s not uncommon for publications to go under. We’re happy to report that this is far from the case in the construction press. In fact, this sector seems to be flying high with print publications back in full circulation. This only goes to show that companies within the sector have confidence in the continued recovery and future growth of the construction industry.
If you’re looking to discuss the UK construction industry forecast with us in further detail or want help with your PR in this sector, drop us a line.