UK Construction Survey Points to Comprehensive Industry Growth

The latest Construction Trade Survey has revealed that construction activity rose for the second consecutive quarter in Q3, suggesting that the industry’s recovery is continuing.

Growth was reported by businesses across all industry areas – civil engineers, specialist contractors, product manufacturers, SMEs and building contractors – with further advances anticipated in the next 12 months.

Compiled by the Construction Products Association, the Construction Trade Survey’s other important findings include:

• Around 43 percent of building contractors, on balance, stated that activity rose in Q3, the second highest balance since 2007.
• New private housing was the key driver of construction growth in Q3, with 22 percent of contractors, on balance, reporting that activity rose in Q3 compared with a year ago.
• New orders for building contractors reached their highest level since 2007.
• The most positive sector for new orders was public non-housing, which primarily covers education and health, with a balance of 9 percent.
• Almost half (49 percent) of building contractors reported that costs rose in Q3, with labour costs and materials costs both contributing to the rise.
• A balance of four percent of building contractors reported that tender prices rose in Q3; however, with costs also rising, a balance of 11 percent reported that profit margins had continued to fall.

Given the economic downturn of the last five years, the survey puts forward the notion that positivity is finally beginning to rise within the construction industry.

Welcome boost for the construction industry

Indeed, in the last year, the construction industry as a whole has witnessed an upsurge in activity across all sectors (the rise in new work being the driving force), with statistics indicating that output rose by 2.2 percent between June and July of this year.

This growing demand has prompted Business Secretary Vince Cable to affirm a £150 million boost to the UK construction industry in an attempt to slash construction times, enhance quality and make buildings “more efficient”, with £60 million earmarked from the Technology Strategy Board to help in the design and development.

In his announcement, Mr Cable said: “The construction industry contributes almost £90 billion to the UK economy and supports around three million jobs. We are well placed to take advantage of new and emerging energy efficient technologies, commercialise them, and then export them across the world.”

Consequently, this financial shot in the arm means many more projects will benefit from expert design and construction through quality engineering, which is welcome news for all contractors throughout the country.

UK house building market recovering nicely

Encouragingly, the UK house building market is continuing to rise steadily – thousands of first-time buyers have already received help to get on the property ladder, with over 150,000 new homes built thanks to a £3.5 billion government initiative – with private housing driving growth and the government’s Help to Buy scheme giving the construction industry a noticeable shot in the arm.

Noble Francis, Economics Director at the Construction Products Association, said:  “It was encouraging to see that the recovery, which started in Q2, has continued into Q3.  A balance of 43 percent of contractors reported rises in activity, the second highest level since pre-recession 2007.  Although private housing is clearly driving industry growth, all construction sectors enjoyed increases in output.”

Backing this up, Stephen Ratcliff, Director at UKCG, said:  “These results are more encouraging signs of a turn round in the construction.  Housing, as the leading indicator, is still the main growth driver and general construction still has some catching up to do.  Nevertheless, the mood music amongst UKCG members is more positive than it has been for some time.”

Rising costs and skill shortage warning

It’s not all been plain sailing for the construction industry in the last year, though, with reports of rising costs and skill shortages still causing concern in the third quarter.

Despite the downturn in output over the last five years, increases in wages, alongside hikes in energy prices and fuel and material costs, have continued unabated.

Julia Evans, Chief Executive of the National Federation of Builders explains:  “Confidence is returning to the industry and we are seeing measurable signs of growth and a healthy number of orders.  However, the cost of doing business continues to rise as materials and labour cost increases far outpace revenues.”

For building contractors especially, 34 percent have reported difficulties in recruiting bricklayers, with 32 percent having the same issue when attempting to recruit plasterers – and that’s the highest levels since 2008.

Regardless, these are still hugely encouraging signs for the UK’s construction industry as it continues to shake off the last half a decade’s economic slump.

The author of this article is Dimitris Papadopoulos. He likes to write and report on subjects where business meets finance.