Hesitant Optimism for Construction Industry Sector Growth

13th January 2014

For decades the construction industry has been considered a benchmark for economic recovery as a whole, and despite a 2013 monthly decline, tentative predictions are being made for industry growth over the next three years.

According to the Construction Products Association (CPA), private house building, encouraged by the government’s ‘Help to Buy’ scheme, will be a forerunner of the said growth, predicted at 16% for 2014, with commercial activity bringing swiftly up the rear. It is difficult to predict a shift after 2015, when the ‘Help to Buy’ scheme will end, bringing uncertainty, but, as the demand for housing, despite the recovery, is still exceeding the house building figures, there is an optimism for growth in the industry that has not been this great since the beginning of the downturn.

As 2013 drew to a close, a recovery was observed in commercial activity in London and the South-East and although slow to spread further across the country, the signs are there for further growth in new infrastructure. By 2015, it is predicted that the recovering economy will spur a need for commercial space outside the capital. As public sector construction output fell by almost a third between 2010 and 2012, this will be slowest to recover overall, until capital investment begins to filter through and take hold.

With positive signs in the construction industry as a whole, it is fairly safe to say, however cautiously, that the demand for construction workers will continue to rise, which will, in turn calm the waters in terms of rates of pay. With the need and providence of regular work in the pipeline, contractors will be in short supply, pushing the wages in the right direction for the industry as a whole. Increased lending, rising capital value and demand will all have a part to play in the sub-plot of low tender values, which are gently and quietly rising by an average of 1.6%.

The ‘knock-on’ effect means that the supply of materials will be on the increase. During the second quarter of 2013, builders’ merchant sales began to rise, but industry demand for basic materials, such as bricks, created a backlog and lead-off times reached a high of 20 weeks at its worst. Confidence is building and although hesitant in its optimism, the industry is looking forward to continued growth.



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