UK Construction Prospects
Presented by: Allan Wilén, Economics Director
Date: 23rd October 2012
Market Conditions
 Double dip recession
 Renewed pressure
from public sector
cuts in 2011 & 2012
 Gradual private
sector recovery
110
100
Current Prices - Index 2006 = 100
 Sharp falls in private
sector construction in
2008 & 2009
Construction Activity
120
90
80
70
New Orders
Output
Underlying Project Starts
New Work Output
60
50
2006
2007
2008
Sources: ONS, Glenigan
2009
2010
2011 2012 ytd
Construction’s clients
 Government funded work
has supported output
 Recession hit private sector
workload hard
 Private non-residential
building still a third of
output
 Private housing stabilised
 Infrastructure & Utilities
growth sectors
Government Policy: Key Department Spending
45%
Education
NHS (Health)
30%
Transport
% Change on previous year
CLG Communities
15%
0%
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
-15%
-30%
-45%
-60%
Source: HM Treasury
4
Government Policy
 Looking to private sector
investment to lead
recovery
 Government prioritising
investment in
infrastructure
 Value of publicly funded
new builds to fall over
coming years
 Focus on refurbishment
and improvements
 Return of PFI to bridge
the gap
Social Housing
Education
Brighter Consumer Prospects?
■ Consumers hard hit since 2007
■ Households hit by:
■
■
■
■
■
Weak earnings growth
Tax rises
Higher inflation
Debt levels remain high
Uncertain employment
prospects
■ Restricted bank lending
■ Improved consumer confidence
from late 2012?
■ Lower inflation
■ Moving out of recession
Housebuilders revisit sites
Private Housing
■ Positive start to 2012
■ Further recovery
anticipated
■ Gradual rise in household
incomes and confidence
■ Improved mortgage
finance availability
■ Government initiatives to
lift market
12,000
Project Starts
160,000
Unit Starts
10,000
Unit Completions
140,000
Value of Project Starts £m
■ Hesitant recovery in
2010 faded last year
180,000
120,000
8,000
100,000
6,000
80,000
60,000
4,000
40,000
2,000
20,000
0
0
2008
2009
2010
2011
Sources: DCLG, CPA, Glenigan
2012f
2013f
2014f
Thousands of Units
■ Sharp fall in project
starts during 2008 &
2009
Office Construction
Industry Prospects
 Public sector squeeze as capital funding cut
 Slow private recovery
– Offices, retail and industrial upturn
– Increase in private housing starts
 Private sector recovery hampered by access to
capital
 Improved consumer confidence
 Refurbishment & retro-fit
 Regional divide
Customer Satisfaction
Client Satisfaction
90%
Proportion of scorign 8/10 or more
85%
80%
75%
70%
65%
60%
Product
Service
Defects
55%
50%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
On time & to budget
Time Predictability
Cost Predictability
Project
80%
90%
Project
Design
Design
80%
Construction
70%
Construction
70%
Proportion on time or better
Proportion on time or better
60%
50%
40%
30%
60%
50%
40%
30%
20%
20%
10%
10%
0%
2005
2006
2007
2008
2009
2010
2011
2012
0%
2005
2006
2007
2008
2009
2010
2011
2012
Any Questions?