Regional outlook for the construction industry

A recent report published by the Construction Skills Network into the outlook for the construction industry over the next five years depicts somewhat of a bleak picture.

Few people are under any illusion as to the importance of the construction industry to the UK’s economy and the role it needs to play in supporting the economy’s return to stability and growth. This is because construction in the UK contributes 8% to the country’s GDP and currently employs around 2.6 million workers.

Often seen as a litmus test for the health of the wider economy it is worrying that the ‘Blueprint for Construction 2013-2017’ report estimates a 9% fall in output in the industry in 2012 and predicts a further 3% fall across the sector in 2013 due to restrictions on public sector spending, low consumer confidence and other macro-economic conditions. The report goes on to argue that output in the construction industry will not return to levels seen in 2007 – before the crash – until 2022.   

Segmenting the industry, the report predicts levels of growth and decline for a number of sub-sectors within construction, the most notable of which are predicted declines in output of 19% and 12% in ‘public non-housing’ and ‘public housing’ construction respectively for the coming year.  Of little consolation will be an expected increase in output of between 1-3% for the ‘private housing’, ‘infrastructure’, ‘industrial’ and ‘housing repair and maintenance’ sub-sectors in 2013. Looking at predictions for the five year period to 2017 the report suggests a 6% decline in ‘public non-housing’, 0.5% decline in ‘public housing’ and modest growth in output of between 0.5-3% for all other sub-sectors.

Regional variations within the construction industry:

Segmenting the construction market by region the report analyses regional differences in expected growth in output over the coming years. As may be expected the South East has weathered the decline in the construction industry better than most, seeing only a 1% decline in output since 2007; similarly the East of England saw only a 7% decline. This compares to declines in output of 30% for the North East and 17% for Scotland.

East of England

The Construction Skills Network report forecasts average annual growth in output of 1.2% over the next five years for construction in the East of England with annual growth of 6.1% and 3.5% expected for the ‘industrial’ and ‘private housing’ sub-sectors respectively. Reflecting the substantial decline in ‘public non-housing’ output nationally mentioned previously, the East of England region is expected to see a 3.6% decline in output for this sub-sector.

South East

Growth in construction output for the South East is expected to rise at an average rate of 1.1% per year for the five years to 2017. The best performing sector for the region is expected to be ‘private housing’ with predicted average annual growth in output of 3.3% for the period. Predicted output for the’ infrastructure’ and ‘industrial’ construction sectors are expected to decline annually however, by an average of  1.7% and 0.6% respectively.