10th April 2018

The State of the UK Construction Industry: 2018

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The construction sector paves the way for economic growth. It provides the roads, railways and other infrastructure needed to keep the economy ticking over. It builds the houses and offices required for a growing population and a nimble economy. And it repairs and maintains all of these resources to keep them as productive as possible.

 

We looked at the latest data from the Office for National Statistics and elsewhere to paint a picture of the UK’s construction industry at this critical time.

 

Businesses
There are almost 300,000 construction businesses in the UK. Of these businesses, 39,000 are sole traders, and approximately 125,000 only have a single employee. The regions with the most construction companies are London, the South East of England, and the South West.

Employment and trades
About 2.9 million people are employed in the UK construction industry - that’s about 10% of the country’s workforce. Here’s a breakdown of the trades of these workers.

 

  • 11% Executive and managerial
  • 10% Metal, electrical and mechanical trades
  • 7% Plant and machine operatives and drivers
  • 7% Carpenters and joiners
  • 6% Architects, town planners, and surveyors
  • 5% Civil, mechanical, and electrical engineers
  • 5% Plumbers and heating and ventilating engineers
  • 5% Plasterers, glaziers, and other trades
  • 3% Painters and decorators
  • 3% Bricklayers, masons, roofers and tilers
  • 37% Other occupations

Construction employment is highest in London, the South East, and the North West. Between them, London and the South East account for 29% of UK construction employment.

GDP contribution
In 2016, construction contributed almost £100 billion to the UK, or about 6% of GDP.

Industry structure and growth outlook
Different arms of the construction industry contribute different levels of output. Here’s a breakdown using the latest figures we could find.

 

  • 4% Public housing
  • 18% Private housing
  • 15% Infrastructure
  • 7% Public non-housing
  • 3% Industrial
  • 18% Commercial
  • 18% Housing repair and maintenance
  • 17% Non-housing repair and maintenance

This structure varies between regions. For example, in Wales, infrastructure accounts for 27% of output, while in the West Midlands it only contributes 8%.

 

For the years from 2017 to 2021, forecasts suggest that infrastructure will see by far the biggest annual average growth (5.4%), with private housing also expected to see 2.2%  annual average growth over the same period.

 

Industry construction work looks set to fall by 1.4%, while housing repair and maintenance is expected to see no growth at all.

 

When looking at predicted average annual output growth per region, Wales is in the lead with 6.2% expected average annual growth between 2017 and 2021, followed by the South West (3.1%) and the North West (2.5%).

 

These figures are largely down to the influence of significant infrastructure projects such as Hinkley Point C.

 

Overall, the expected annual average growth rate for the years to 2021 is 1.7%.

 

Housebuilding
Housebuilding has seen a resurgence in recent years, with an increase in completions of about 50% between 2013 and 2016. Of the approximately 170,000 housing completions in the UK in 2016…

 

  • 138,000 were from private enterprise
  • 29,000 were from housing associations
  • 3,300 were from local authorities.

Despite this good news, there’s a long way to go before we reach the 250,000-300,000 new houses the UK needs each year.

There are also concerns over the dominance of large housebuilders.

In 1988, small builders (there’s no strict definition here, but a good rule of thumb is builders with less than 100 completions a year) built 40% of new homes, compared with only 12% today.

In 1960, the top ten housebuilders contributed 9% of homes - now it’s 50%.

Today, large housebuilders hold almost 400,000 plots of land with some form of planning permission.

Risks
Brexit remains the biggest unknown for UK construction, and could potentially bring significant disruption to the sector. First, in the form of skills shortages - about 8% of construction employees are EU nationals. Second, supply chains will be affected by changes to regulations and standards after the UK has left the EU. Of course, Brexit does present opportunities for construction as well as risks, particularly when it comes to regulation.

Regarding housebuilding, barriers to the market are significant for small housebuilders. Finance availability is a continual challenge, as is red tape. Smaller housebuilders are vital for developing smaller sites, and often complete projects more quickly. Both these attributes are crucial to meeting housebuilding targets.

 

Finally, output in the construction sector remains slow. Growth figures are overly reliant on large infrastructure projects, and the sector remains vulnerable to recessions or other economic shocks.

 

Summary
There’s no doubt that the UK’s construction industry will go through some significant changes over the coming years - and contractors should certainly have some contingency plans in place. But with the current political focus on infrastructure and housebuilding, and especially the important role that smaller businesses can and should play in these projects, there are reasons for optimism.

But you need the right tools at your disposal if you’re to take advantage of opportunities that come your way. If you’d like to upgrade to an all-in-one construction management software page that can be tailored to meet your needs during this uncertain period, start here.


Sources:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/229339/construction-sector-infographic.pdf
https://www.ons.gov.uk/businessindustryandtrade/constructionindustry/articles/constructionstatistics/number182017edition
https://www.hbf.co.uk/documents/6879/HBF_SME_Report_2017_Web.pdf
https://www.ft.com/content/f693cd76-1591-11e8-9376-4a6390addb44 
https://www.independent.co.uk/news/business/news/uk-construction-workers-brexit-skills-gap-rics-labour-shortage-a7961971.html
https://www.citb.co.uk/documents/research/csn%202017-2021/csn-national-2017.pdf


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