As IMF Upgrades UK Economic Outlook, What Does the Future Hold for Construction?
The recent announcement by the International Monetary Fund (IMF) that it had underestimated the United Kingdom’s economic forecast has led to renewed confidence in key sectors that were otherwise predicted to lag in recovery. The increased of growth projection of 2.4% from 1.9% for the UK by the IMF is partly the result of easier credit conditions.
Since the global financial crisis of 2008, the impact of slow growth had made economists hesitant in their predictions of across the board. The IMF’s revision of its growth forecast for the British economy in 2014 has come closer to other economist projections. Economies of scale such as construction, are likely to see upwards growth in the near future in response to the government’s decision to expand lending to both mega-projects and residential investment.
Although there is warning that emerging markets are still undergoing fluctuations in response to geopolitical risks, predictions for the UK economy will hold steadfast, exceeding other developed economies through the year. This comes at a time when the Bank of England’s near forthcoming policy to raise interest rates has caused some hesitation in analyst predictions for the housing market.
The UK government’s ‘Help to Buy’ scheme has been a major boost for developers seeking to initiate new residential housing starts, as well as infrastructural projects, however. Overall, building is set to increase, with strong demand reported for mortgages from banks like Clydesdale Bank, although there is some caution that this growth trend may be short term.
If the most recent predictions by the IMF have also set the pace for foreign direct investment (FDI) in UK construction projects, the country’s economic recovery is supported by the government’s growth related policy shift, as well as market reporting of positive results early Q1FY14.
Construction is responsible for a sizeable proportion of the UK’s Gross Domestic Product (GDP) and Gross National Product (GNP). Expansion of infrastructure in the alternative energy sector, illustrated in the Hinkley Point C nuclear reactor slated for construction this year, is example of the government’s public sector strategy to advance the country’s economic position. Sector leaders like Balfour Beatty are also contributing to employment opportunities amid a surge in UK construction growth.
At present, the construction sector is valued at 1.5% annual growth. In 2014, a 2.3% growth rate is expected. The revision of forecasts for the remaining quarters of FY14, means that the UK’s construction industry will see sustained growth over the coming months, although it could take several years for the sector to return pre-crisis levels of output. While no one is discussing a boom in the sector, as the UK is still recovering on the whole, projections for London far exceed original expectations.