Signs of recovery in the UK construction sector?

Tough times for UK construction

The importance of the construction sector to the UK economy is difficult to overstate,  as it employs 1.5 million people and  makes up roughly 10% of the UK’s GDP. However, as the construction sector is  investment led, it can suffer particularly hard in times of economic decline. The recessions of the mid 1980s and early 1990s had a severe effect on the sector, only for it to bounce back in the late 1990s with changing government policy (Private Finance Initiative funded investment) – which led to a comprehensive programme of building in the educational, health and transport sectors. So, the unprecedented economic troubles of the last two years have presented yet another obstacle for the sector to overcome – this time things are a little different though, there has been very little good news for the sector in three years and the fall in activity has been the sharpest in 35 years.

With this in mind, the Construction Products Association (CPA) has produced an interesting report highlighting the current status of the UK Construction Sector, and although the news is somewhat mixed – there are at least some signs that things are beginning to turn.

The Bad:

• A 3% decline in construction activity during 2010 (last year dropped 12%)
• 2011 until any growth is expected, with only 1% a year in 2011, 2012 and 2013
• Since November 2008, private sector construction fell by almost 20%  (a further fall of 4% is anticipated during 2010)

The Good:

• A growth of 32% in private house building expected between 2010 and 2012
• A boost from infrastructure work in the regulated sectors of rail, water and energy sectors
• Olympic Park construction is well underway and some of the Olympic Village is now complete
• £100m prison in East Dunbartonshire
• Barbour ABI report that the number of roads projects in 2010 has remained broadly flat compared to 2009, the value of these projects has increased fourfold
• Meanwhile, work on the £16bn Crossrail project continues and £1.1bn was announced for electrification of the Liverpool-Manchester line.

This report is an interesting indicator of the current status of the UK construction sector, what are your opinions? Will construction be able to rebound from this economic downturn as it has in previous years? or is the decline now so deep seated that things will never return to normality? We welcome your thoughts.