The Future Of Construction: The Reasons Why The UK’s Construction Output Is Decreasing Whilst The Economy Is Increasing

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If the latest financial reports are anything to go by, now should be a time for celebration. Growth is on the up, output is higher than anyone predicted, and manufacturers are enjoying their longest sustained period of rising output for the better part of a quarter of a century.

So, three cheers for the economy, right? Here’s to picking up our hard hats and buckling down to the scores of new projects that lie ahead.

Not exactly.

As those facing an uncertain future will tell you, the UK’s overall economic growth isn’t exactly reflected here in the construction industry, which, in 2017, faced one of its most challenging periods of the decade, and which dealt with a contraction of 2% in the final three months up to this past November.

Sure, there was a glimmer of hope in November itself, when output increased by 0.4%, but even that wasn’t enough to revive the fortunes of an industry that had seen profits tumble and projects dry up throughout the year.

So, what’s going on? Why is it that, despite good news all round for the UK economy, the country’s construction industry continues to struggle?

Yes, you guessed it – it’s The B-Word.

No, not that one! The other B-Word.

 

brexit construction

Brexit

Whilst other industries have endured some level of uncertainty following Britain’s decision to leave the European Union, the long-term nature of most construction projects leaves our industry more susceptible than most.

Projects can only be given the go-ahead when there is expected to be a demand for new buildings at the end of the construction process.

Given that this typically takes several years, and given that nobody has yet been able to accurately predict what that demand may be in a post-Brexit UK, new projects simply aren’t being green-lit, whilst those which got underway before the EU Referendum in June 2016 will be coming to an end with nothing to replace them.

Not surprisingly, commercial and infrastructure projects have been the hardest hit, with the Financial Times recently reporting that civil engineering work has declined for a longer period than any time since early 2013.

 

construction uk

Moving forward

Of course, we’re talking about statistics from November here.

Since the quarterly results were wrapped up, measures have been taken to finally give us all some clarity on what a Brexit deal – if indeed there still is one – will mean for the economy and the country at large.

Does that mean good news for construction?

Not necessarily.

Tim Moore, Associate Director at IHS Markit which collates and publishes the growth data, spoke at the publication of the latest figures, telling the UK press that even an eventual agreement may not revive the industry’s fortunes.

“With the UK government insisting, for now, that Britain eventually will leave the EU’s single market and customs union, firms likely will remain reluctant to commit to construction projects with long time horizons,” he said.

So, is that it then? Time to pack up our tools and head home?

Not so fast, because there is a glimmer of hope…

 

house building uk

House building rises

In November, we reported that UK Chancellor Philip Hammond had announced a total £44 billion investment in housing, including £630 million designed to ensure the completion of over 40,000 properties on which progress had ground to a halt.

Whilst it may take time for the impact of that investment to be truly felt, in the short term, house building has been responsible the immediate boost to the industry, with that aforementioned 0.4% output increase being directly attributed to housing.

And though that may not be enough on its own to revive the construction industry’s ailing fortunes completely, the housing sector is likely to continue offsetting some of the loss caused by the downturn in commercial projects.

Now, the only question is whether housing will be enough to sustain the industry long enough whilst we wait for some much-needed clarity around a post-Brexit economy.

 

How has Brexit affected your business? Is the increase in house building projects really enough to offset the losses in commercial and infrastructure projects? Join in the discussion on Facebook and Twitter, or let us know in the comments below.

Tradesman Saver also provides insurance for construction businesses, insurance for builders and insurance for house builders. For further information, please visit our Construction Insurance, Builder’s Insurance and House Builder’s Insurance pages.

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