Some thoughts on the state of the construction industry

Some thoughts on the state of the construction industry

Some thoughts on the state of the construction industry

More than 50 businesses gave feedback to a study on the view of people working in the construction sector to see how they think Brexit will affect jobs, projects and industry. Of the respondents, 86% expect to see a rise in the demand for skilled workers, while 92% think freedom of movement is beneficial to the UK’s construction industry.

The survey also suggested that 86% thought leaving the European Union would lead to many government infrastructure projects not going ahead, with 88 per cent believing the UK relies on skilled labour from Europe.

Marwan Mohamed, a recent built environment graduate from Birmingham City University, led the study, alongside Erika Pärn, lecturer in architectural technology at Birmingham City University. ‘Brexit: Measuring The Impact Upon Skilled Labour In The UK Construction Industry’ was produced as part of their final year dissertation.

The authors said: “This research deals with a topical, historic and unprecedented matter that is currently shrouding the UK construction sector. “It concludes that the UK construction sector relies upon EU skilled labour, that there is widespread industry opposition to Brexit, and that many within the sector believe Brexit will reduce the supply of skilled labour from the EU rather than increase or enhance it.”

The study makes a number of recommendations:

  • Retaining free movement by remaining in the European Economic Area.
  • Retaining current workers through increasing wages, providing guaranteed overtime and reducing physical exertion by expanding the use of technology.
  • Creating more apprenticeship opportunities.
  • Improving the image of a career in construction to appeal more to young people.

Construction growth forecasts have been downgraded for next year with no growth now expected in 2018 due to falls in office, retail and factory work.

Forecasters at the Construction Products Association warn that any growth at all in the next two years will wholly rely on the pace of delivery of government infrastructure projects.

  • If spending on major infrastructure is slowed the industry faces a 1% fall in output in 2018.
  • Construction is expected to bounce back again to 2% growth in 2019 as infrastructure activity kicks into gear.

Major projects in rail and water & sewerage such as HS2 and the £4.2bn Thames Tideway Tunnel will lift infrastructure output by 25% in 2019.

Autumn CPA forecast

  • Construction output to rise 0.7% in 2017, 0.0% in 2018 and 2.0% in 2019
  • Private housing starts to rise 5.0% in 2017 and 2.0% in 2018
  • Office construction to decline 5.0% in 2017, 15.0% in 2018 and 5.0% in 2019
  • Retail construction to fall 7.0% in 2017, 5.0% in 2018 and rise 2.0% in 2019
  • Infrastructure work to rise by 7.4% in 2017, 6.4% in 2018 and 9.8% in 2019
  • House building will continue to be a primary driver of growth, with private housing starts rising by 5% in 2017 and 2% in 2018. With the government’s Help to Buy equity loan accounting for 40% of new homes the extra £10bn that government announced for the scheme in October will continue to sustain house building despite the slowdown in the general housing market.

Predictions are that the sharpest decline will be in the commercial sector, particularly office work as Brexit-induced wariness among investors has led to a sharp fall in contract awards.

Office construction is expected to fall 15% next year, and is likely to accelerate if it turns out that the UK will not be part of the Single Market and financial services firms transfer operations into other EU member states.

Noble Francis, Economics Director at the Construction Products Association said: “Construction activity is currently high, particularly in cities outside the capital such as Birmingham and Manchester. “However, the forecasts highlight that the fall in construction new orders since the second half of 2016 is now starting to feed through to activity on the ground as projects signed up to pre-referendum end and are not being replaced.

“This is especially the case in key areas such as the construction of new commercial offices in London, where demand for new high profile office space from the financial sector has slowed considerably.

“Infrastructure is expected to be major driver of construction activity in the next few years with work on major projects but the sector has been dogged by constant cost overruns and delays.

“Given that construction activity is forecast to be flat in 2018, if government cannot improve delivery of its infrastructure plans, construction output is likely to decline next year.”

Ian Marrow

VAT Associate