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Construction set for growth despite Brexit uncertainty

Over 150,000 construction jobs are set to be created over the next five years despite Brexit uncertainty and Carillion’s collapse, a new forecast from the Construction Industry Training Board (CITB) reveals.

  • Infrastructure and housing best performing sectors
  • Carpenters, process managers and professional staff all in demand
  • Commercial sector could be hit by Brexit nervousness

Download the Construction Skills Network UK report for 2018 – 2022 (PDF 1.69 MB)

A massive 15,350 carpenters and 9,350 labourers will be needed as homebuilding ramps up, according to this year’s Construction Skills Network report, the UK’s most comprehensive and up-to-date sector forecast.

However, the strongest job growth will be in a range of professional and managerial roles as the industry seeks to boost its productivity, which will grow by 7.8% and 5.6% over the next five years.

The CSN forecasts average output growth of 1.3%, with 158,000 jobs created. Infrastructure remains the strongest performer with an annual growth of 3.1%. However, housing output, both public and private, is also expected to expand, by 2.8% and 2.2%, respectively. In contrast, the commercial sector is not predicted to grow at all over the next five years, as investors potentially hold back decisions due to Brexit uncertainty.

CSN figures show employment is projected to grow for the fourth consecutive year at 0.5% a year on average to 2022. This would take employment in the industry to 2.77 million in 2022, only 3% below the 2008 peak.

CITB Policy Director Steve Radley said “Despite all the gloom around Carillion and uncertainty from Brexit, our report’s message is that construction will continue to grow and create more jobs.

“Though growth is slightly down on 2017, it’s looking more balanced with housing and infrastructure both expanding significantly. And the range of job opportunities is growing. While we need to bring in lots of people in the trades, the fastest growth will be for professionals at 7.8% and for managers and supervisors at 5.6%.

“By 2022, employment will be in touching distance of the heady 2008 peak so we face a massive recruitment and training challenge, which is likely to get harder after Brexit. So while we can take some comfort from weathering the recent storms, it’s vital that we make the investment in skills today that will shape our own destiny for tomorrow.”

Nations and regions

The report reveals a mixed picture across the devolved nations and English regions. Like last year, Wales continues to perform best with output growth estimated at 4.6% per year. Scotland is likely to remain largely static at 0.1%, with housing growth mitigating a decline in infrastructure from record highs.

Wales’ forecast growth is largely attributable to major infrastructure projects including Wylfa nuclear power stations as well as a series of major road improvements such as the M4 upgrade.

In Northern Ireland, annual growth is down from last year’s 1.6% forecast to 0.5% – this is largely attributable to a slackening of the commercial sector.

In England, the North West and South West lead the growth rankings, both with 2% growth anticipated. The West Midlands is also expected to perform well with an overall average output of 1.8% over the five years. For the remainder of the English regions growth is predicted to range between 1.5% in Greater London to -0.8% in the North East.

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Construction bounces back after a recent stall in growth

After a torrid month in May for construction, figures began to move in the right direction across June, with contract awards increasing by twelve per-cent, as a number of high profile projects were given the green light.

The latest edition of the Economic & Construction Market Review from industry analysts Barbour ABI, highlights the levels of construction contract values awarded in June across all regions of Great Britain, which totalled £5.5 billion based on a three-month rolling average, an increase on the £4.9bn from May.

London led all regions with 26 per cent of the total construction contract value for June. This was greatly helped by the North Quay Poplar development contract award, worth £800 million, the
largest project across all of construction on the month.

Across the various construction sectors, it was Residential building that produced the highest value on the month, reaching £2.5 billion, bouncing back admirably after a dip in May when it decreased to £1.7 billion. Furthermore, four of the top ten biggest projects in June came from the Residential sector. There were also monthly increases in Industrial, Commercial & Retail and Medical & Healthcare. The largest decrease came from Infrastructure, which lacked a high value project on the month to help increase its figures.

Looking at construction in June across the UK regions outside of London, the dominance continued across southern England with the South East in second place for construction contract value with £713 million awarded, followed by the South West in joint third place with the North West, each tied at £627 million.

Commenting on the figures, Lead Economist at Barbour ABI Michael Dall said “The construction sector bounced back after an election-focused month in May, as the residential sector once again performed strongly, continuing the trend of it holding the construction sector steady. However with declines in value from Hotel, Leisure & Sport and in particular Infrastructure, there is continuous pressure on Residential to achieve high values every month.”

“With the Governments increasing focus on raising the levels of major infrastructure projects, it’s surprising to see a lack of development in this sector across June. The anticipation however, is that we will see larger public sector contracts come to the forefront, such as offshore wind farms, energy plants and motorway upgrades as we continue into 2017.”

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Growth continues in UK for construction SMEs

The SME construction sector grew in the second quarter of 2017, albeit at a slower rate in most parts of the UK than the first three months of the year, according to the Federation of Master Builders (FMB).

Key results from the FMB’s State of Trade Survey for Q2 2017, which is the only quarterly assessment of the UK-wide SME construction sector, include:

  • Q2 2017 was the 17th consecutive quarter of positive growth which means that the construction SME sector has been growing for more than four years (ie since Q2 2013)
  • Almost one in two construction SMEs predict rising workloads in the coming three months, with just 9% predicting a decrease in activity
  • 83% of builders believe that material prices will rise in the next six months
  • 60% of construction SMEs are struggling to hire bricklayers; 57% are struggling to hire carpenters and joiners; and 47% are struggling to hire plumbers
  • Almost two-thirds (62%) of construction SMEs expect salaries and wages to increase in the next six months

Brian Berry, Chief Executive of the FMB said “Rising material prices and salaries could be starting to dampen growth among construction SMEs. However, it is encouraging to see that the sector has continued to grow despite the recent snap General Election and the resulting hung Parliament. The construction SME sector is particularly vulnerable to any dips in consumer confidence that might come from periods of political uncertainty. It may be that a number of home owners decided to delay any big spending decisions on new extensions or loft conversions while the election campaign was underway – this would account for the slow-down in growth seen in the second quarter of 2017.”

“Looking ahead, almost two-thirds of construction firms expect wages and salaries to increase over the next six months and this is in contrast to stagnant wages elsewhere in the economy. Rising salaries are undoubtedly the result of the escalating construction skills shortage – construction workers know their worth and are demanding higher wages from their employers. The majority of construction SMEs are struggling to recruit key tradespeople such as bricklayers and carpenters and we’re seeing shortages in other trades, such as plumbers and plasterers, starting to creep up. With Brexit on the horizon and worrying talk of the so-called ‘Tier 2’ immigration system replacing the free movement of people, the construction industry urges Ministers to bear in mind their strategic house building and infrastructure targets before pulling up the drawbridge on EU migrant workers.”

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Construction workloads continue to grow slowly, post-referendum

The pace of increase in workloads in the construction market continues to slow, according to the latest RICS UK Construction Market Survey, extending a trend that goes back to the middle of last year.

This flatter picture is visible across all sectors; 17% more respondents reported a rise in activity over the previous three months compared with 28% in the first quarter, with the most pronounced slowdowns being seen in the private commercial, industrial and housing segments. That said, 27% more contributors still reported a rise in private housing activity – down from 36% in Q1 – while 17% more respondents saw their workloads in the private commercial sector rise rather than fall in Q2.

Significantly, for the second successive quarter, the biggest constraint on output according to respondents is finance with more than two-third of contributors highlighting this as the principal challenge. In breaking down the term financial constraints, 36% of respondents reported that a lack of funding was restricting new developments. Meanwhile, planning and regulatory delays also remain a key issue with 60% of respondents citing that these are constraining growth.

Despite the slowdown in activity in Q2, skills shortages remain a problem with 56% of contributors reporting that a lack of appropriately skilled labour was a constraint on growth. Bricklayers and quantity surveyors remain in particularly short supply with 59% and 57% of respondents citing difficulties in these areas.

The more uncertain prospects for the economy have led to a less optimistic outlook for the sector over the year ahead. Although, putting this in perspective, 23% more contributors still expect activity to rise rather than fall over this period. On average, contributors foresee their workloads increasing by 1% over the coming 12 months, down from the 2.8% growth predicted in Q1.
Expectations for employment growth have also moderated significantly with a rise of 0.6% anticipated, down from 2% the previous quarter.

Aside from in Scotland where activity flatlined relative to Q1, respondents in all other parts of the UK continue to report a rise in workloads.

Simon Rubinsohn, RICS Chief Economist, commented “The latest results from the RICS Construction Market Survey suggest that the second quarter of the year saw a further moderation in the growth trend which is not altogether surprising given the build-up to the EU referendum. Significantly, the biggest issue at the present time alongside uncertainty looks to be credit constraints with over two thirds of contributors highlighting this issue as a concern.

“Encouragingly, the swift actions of the Bank of England in creating additional capacity for the banking sector to provide funding to meet demand should help alleviate some of this pressure. Nevertheless, anecdotal evidence does indicate that the challenge for the British government in establishing a new relationship with the EU could see some investment plans in the construction sector scaled back.”

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New ONS figures indicate increased uptake of construction materials

The Brick Development Association, the body that represents the clay brick and paver industries in the United Kingdom, has responded to recent comment about the state of the construction industry. The growth in the brick deliveries over the last month follows extensive work manufacturers have undertaken over the last year.

Figures released today from the Office of National Statistics (ONS) and Department for Business Innovation and Skills show that brick deliveries in May increased by 3.1% on the same month the previous year. Additionally, the month on month change shows a 0.6% increase in May 2016, following a 1.5% increase in April 2016 on the same basis.

Andrew Eagles, CEO of the Brick Development Association said “There is currently some uncertainty at central government. All major parties though support a drive to significantly increase home building numbers. Osborne’s move away from austerity and the likely interest rate drop are likely to improve the construction environment.

“It is important to look at statistics. There has been a significant increase in brick production over the last twelve months and this is confirmed by the latest ONS statistics.

“It is heartening to see how quickly and how dramatically the sector has risen to meet demand [and in particular contribute to the much needed rise in housebuilding.”

This recognition only adds to the current emphasis on the need for housing. Housing minister Brandon Lewis has promised to build 1m homes by 2020, to bridge the gap in recent years between houses built and houses required, which should lead to further growth within the brick industry.

“The increase of brick deliveries throughout May is a positive contribution to the revitalisation of the housebuilding sector”, Eagles added. “When the volume of new housebuilding starts to grow closer to the 200,000 a year target the brick industry will satisfy demand.”

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Construction in March gains momentum after a slow start to the year

Construction in March gains momentum after a slow start to the year.

After a subdued start for construction in 2016 the industry picked up the pace in March, with £6.1 billion worth of construction contracts delivered. This is the highest figures of the year to date which was particularly influenced by the continued strength of the residential sector.

According to the latest Economic & Construction Market Review from industry analysts Barbour ABI, total construction contract value figures for March were almost 10% higher than in February.

Alongside the improving figures, residential construction contract values were worth £1.9 billion in March, 31 per cent of the total amount of contracts for the month.

The positive news from March continues as the commercial & retail sector increased its monthly contract value by 25 per cent and Infrastructure by 30 per cent, which is an extra £500 million of contract value compared to February.

Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said “it’s encouraging to see the industry pick up the pace after a lacklustre start to the year. Housebuilding once again continues to storm ahead in the industry, as housebuilders continue to try to keep pace with the demand and appetite for new housing.”

“With both the commercial & retail and infrastructure sectors increasing their levels of activity in March, it would be good to see this continue and take some of the pressure away from private housing, which has been the only sector that has continually grown and at times propped up the industry in recent years.”

“With the EU referendum looming, this will be interesting to follow over the coming months to see what affect it will have across the construction sector as there is anecdotal evidence to suggest this is starting to make an impact on investment decisions inside the boardrooms of construction firms.”

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The future looks bright for family businesses in the construction sector

Family firms across the UK are setting their sights on expansion following another hugely successful year for the sector.

New research by Oxford Economics for the Institute for Family Business (IFB) Research Foundation reveals the vast contribution family firms make to the UK economy – employing over 11.9 million people and making up 87 percent of all private sector firms in the UK.

There are now more than 800,000 family firms in the construction sector, making up almost one in five of all businesses in the industry. Family businesses also account for 94 per cent of all private sector firms in the construction sector – one of the highest concentrations in the UK.

Kate Woods, a spokeswoman from construction family business, Osborne, added: “Osborne echos the amazing and timely achievements of family businesses and this year we are excited to celebrate our 50th anniversary. We rebranded to a vibrant magenta in 2014 and we are committed to finding customer led solutions, listening to our customers and working in collaboration with their needs.”

Since 2013 family businesses have increased employment by six per cent and turnover has also seen a strong rise, increasing by two per cent to reach £1.3 trillion. In addition, family firms paid £125 billion in taxes and contributed over a quarter (26%) of the UK’s entire GDP.

Speaking about the new findings, Peter Armitage, Chairman of the IFB, said “The report sheds light on the sheer size and scale of the family business community. It’s an important reminder of how vital family-run firms are to the UK – serving as the backbone of our economy, with family firms making a phenomenal contribution across all sectors, industries and regions.

“Family businesses have always been at the very heart of the UK economy and based on the steady rise in their recruitment and turnover, it is clear they are here to stay. It’s encouraging to see family firms with such a buoyant attitude towards their future expansion – almost half of family SMEs expect to grow over the next two to three years.”

Growth and expansion is a top priority for many SME family firms with just under half (49%) stating they aim to grow over the next twelve months.

Looking to how they will turn this ambition into reality just under a half of firms (43%) say they will invest in improving the skills of their workforce to support growth, with a third (33%) planning to boost productivity through investing in new machinery and premises.

Looking beyond their traditional activities to diversify their business and customer base, 42% of family firms are planning to move into new markets and 37% are developing and launching new products and services.

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UK construction set for growth – with 230,000 jobs to be created

The Construction Industry Training Board (CITB) is calling for more apprentices as it releases new figures today which forecast annual average growth of 2.5% for the next five years – and a massive 232,000 jobs to be created.

CITB’s Construction Skills Network (CSN) report – the industry’s most comprehensive and up-to-date – predicts sustained growth from 2016-2020, driven by infrastructure and private housing.

Steve Radley, Policy Director at the CITB, says,“All types of training, and especially apprenticeships, will be vital to delivering this pipeline of work. This positive forecast should inspire more people to start apprenticeships, and more firms to take them on.”

New nuclear power stations at Hinkley Point, Somerset, and Wylfa, Anglesey, alongside rail projects such as Crossrail and HS2, will drive year-on-year infrastructure growth of 6.1%. The commercial construction sector will experience growth of 3.4% per annum, while private housebuilding will also experience sustained growth across the forecast period. Output in the housebuilding is expected return to pre-recession levels by the end of the forecast period, reaching £26bn by 2020.

UK construction growth is set to be fourth in Europe up to 2017, with British builders outstripping those in Germany, France and Spain.

Annual growth is predicted in all the UK’s regions and nations up to 2020, with Wales faring best with year-on-year growth of 7.1%, followed by the South West (4.4%), London (3.5%), and the North West (2.6%).

In response to the ongoing skills challenge, the CITB is in 2016 launching a series of new partnerships with local and regional training providers to make sure the right training takes place where it is needed most.

It is also continuing to work closely with the construction industry to further develop Go Construct, an industry-led web portal, to showcase the opportunities in the industry and encourage more people to join the sector. This should help construction firms recruit the talent they need to grow, and help workers learn about all of the great career opportunities available.

Steve Radley, Director of Policy at the Construction Industry Training Board, said “We can’t build the Britain we want without growing apprenticeships – and the careers they lead onto. That’s why it is vital that these new statistics, showing solid, sustained growth, inspire more people join the construction industry.

“We also want to attract workers who have left the industry to return, and upskill those currently in the sector, so we can deliver major projects and new housing faster and better.”

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The North West led all regions for new-build activity

The North West residential sector saw a significant boost in the number of new build properties commissioned in Q3 this year, leading all regions with 5,275 units.

According to the latest Market Insight report from construction data experts Barbour ABI, £621 million pounds worth of property development was commissioned in Q3, with £608 million from the private sector. This is a significant figure that will likely provide a boost in confidence across the industry and region, as investors are giving the go-ahead to a significant amount of residential projects.

Greater Manchester had the leading amount of residential investment in Q3 within the North West, with major projects commissioned including two city centre £40 million projects, the New Union Street and Axis Tower developments, constructing 302 & 172 apartments respectively.

Six of the top ten largest residential projects commissioned in the region in Q3 were private developments for flats, which has been a major area of residential growth within the region.

Commenting on the figures, Michael Dall, Lead Economist at Barbour ABI, said “With a lack of housing across the North West heavily publicised, it’s welcoming news that the region leads the UK for new build units in Q3.”

“With the mismatch between housing supply and demand, property prices have continued to rise at a significant pace in the region. Home movers, investors and housebuilders will welcome the news, as major residential investment has been poured into the North West in the last quarter, which will hopefully help to alleviate the housing shortage.”

“If there’s one concern coming from these latest figures it is from a social housing perspective. Only ten of the 87 projects came from the public sector in Q3, however it’s likely that affordable housing will be provided within many of the up-coming private residential developments.”

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ONS question reports of ‘healthy growth’ in construction

News that we are experiencing strong growth in constructing has been brought into disrepute by new figures released by the Office for National Statistics (ONS).

The Markit/Cips Purchasing Managers’ Index for construction that was released last month clearly indicated a reassuring reading of 58.8; 50 being the point which separates expansion from contraction. Whilst down from 59.9 recorded in the previous month, the report still highlighted strong growth in construction, an industry that is accountable for around 6% of the UK’s GDP.

However, the latest GDP estimate made by the Office for National Statistics revealed quite the opposite to that being reported by Market/Cips, suggesting that construction output actually reduced by 2.2% in the three months to September.

So which report is right!?

Chief UK and European Economist for IHS Global Insight, Howard Archer commented the clear contradictions between the reports raised “considerable doubts” about the overall accuracy of the official construction data given by the ONS. He pointed out that other data compiled by Bank of England regional agents on construction also pointed towards growth within the sector, rather than reduction.

Vice President and Senior Economist of Markit, Tim Moore reaffirmed their own results, saying “The sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn.”

The ONS had been due to release a report comparing their own figures and those of Markit on 11 September, but this had to be cancelled for “operational reasons”.

Mark Robinson, the chief executive of the Scape Group warns that regardless of whether the industry has experienced growth or not this year, something must be done to attract new talent into construction if we are to sustain a healthy and vibrant industry long-term. He said “Much of the skilled workforce is due to retire in the next five to 10 years and if we can’t train enough new talent to replace them, the construction industry will struggle to deliver the new homes and infrastructure that both the community and the economy badly needs.”

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