29th May 2014

The construction industry in 2014: a mid-year, sector-by-sector review

As we near the halfway mark for 2014, it’s time to review the state of the construction industry. 

The construction industry in 2014: a mid-year, sector-by-sector review

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It barely seems a few weeks since we set out our forecasts for what 2014 had in store for the construction industry, but now it’s time to conduct a mid-year review. The Budget has passed, the UK economy has finally regained the ground it lost during the recession and the political parties are beginning to set out their plans for election year. The next six months will bring many changes to the construction industry in the UK, as firms take advantage of improving market conditions and anticipate market trends. Of course, the recovery isn’t going to be simultaneous across all regions and all sectors – and it certainly hasn’t been so far, as anyone with even a passing interest in the construction industry will know. We take a look at how various sectors of the construction industry have fared in the past six months, and what the future could hold for each of them. Is now the time for your business to take on a risky new job, should you be trying out some construction software to help you through this period of growth or would it be better to play it safe until we can be sure that the recovery is sustainable?

The housing sector

House building has been central to the construction industry’s recent recovery. Strong demand for more homes coupled with a shortage in supply has driven house prices up across the UK. Commentators report that the government’s Help to Buy scheme has been responsible for a large proportion of this growth, and there are concerns that another housing bubble may have formed. If interest rates rise, consumers will be faced with a mountain of debt and may fail to pay off their mortgages, leading to the potential collapse of the housing market. However, it’s all speculation at this point, and – provided interest rates stay low – the market could remain buoyant for years to come. With house prices set to continue to rise over the next 12 months, the housing sector will remain particularly attractive for construction firms, particularly in London and the Southeast.

Non-housing private projects

The latest Glenigan index also shows strong growth in the hotel and leisure sector, offices, and utilities. The growth figures will not only please the politicians, but more sustainable construction growth will also be appreciated by those of us in the construction industry. It’s far easier for us to base business plans around sustained growth rather than on unpredictable housing booms. Glenigan reported that the value of office construction projects kicking off in the first quarter of 2014 was 34% higher than Q1 of 2013. These non-housing projects are driven by increased aggregate demand across the economy, reflecting the slow but steady recovery the UK economy has experienced over the past 12 months. With recent reductions in corporation tax, plus the government’s continued focus on improving conditions for businesses, we can only expect business demand to increase – which is great news for construction companies.

Infrastructure

Government spending continues to be cut across the vast majority of departments, which means less funding available for large-scale infrastructure projects. However, with the general election on the horizon, large-scale infrastructure projects (and the jobs they create) have the potential to be vote winners. That could mean we’ll see some huge contract opportunities emerging in the near future...

Other issues

The Scottish independence referendum also has the potential to throw a spanner or two in the works of construction companies’ best laid plans. A ‘Yes’ vote could have a significant impact on Scottish construction companies in particular, especially if they take on jobs across the border. Currency exchange charges could add a huge burden to these companies. In addition – according to Glenigan – some contractors are becoming concerned about the rising cost of raw materials, and are therefore trying to shorten the supply chain in order to secure better margins. Construction companies (big or small) may wish to see a demo of construction accounting software in action to help them recoup additional costs. Job costing software provides construction firms with incredibly detailed information on the cost of specific components of each and every job. This enables you to easily track which aspects of the job are exceeding the budget – so you can take measures to prevent costs from spiralling. Contact our team today to see how Integrity Software could help your company cruise through the second half of 2014 and beyond. 


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