03rd February 2014

UK construction industry forecasts: what to expect in 2014

UK construction industry forecasts paint a mixed picture for 2014. What does the future of the construction industry hold for your business?

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UK Construction Industry Forecast2013 was a strange year for the construction industry. Business struggled in many sectors in the first half of the year, with optimism and output growing strongly during the final two quarters. However, the industry is still far from completely recovered from its pre-recession peak – remaining around 10% shy of that point, the latest figures suggest. It’s unsurprising that some concerns remain about the stability and sustainability of the UK construction industry’s growth. Plenty of experts have attempted to forecast what 2014 might bring. Here at Integrity Software, we know that it’s important for your business to understand how market forces will affect trade in the year ahead. How will such matters affect your company this year?

What do the experts predict?

Industry analysts are generally positive that construction industry growth will continue in 2014. A recent forecast by the Construction Products Association expects the UK’s construction industry to grow by 3.4% in 2014 and a further 5.2% in 2015. The growth is expected to be lead by the private sector, with public sector output and private foreign investment remaining almost flat. Several consultants, including GVA, have also posted forecasts. GVA expect growth in 2014 to be modest, with more impressive figures expected for 2015 to 2017. Experian upgraded its forecast for 2014 from 1% growth in output to 2%. Forecasts by Leading Edge and Hewes concur with these forecasts. It seems that everyone is expecting at least modest growth in the UK construction industry in 2014.

Where will the growth occur?

As we all know, these UK forecast averages fail to show regional trends. We know that the construction industry continues to grow quickest in London, as does construction industry employment. However, there are recent signs that the growth is beginning to spread into other regions. Government schemes such as Help to Buy and Funding for Lending have given a boost to the residential market, although the latter will shift its focus to helping small businesses in the near future. It’s clear that the residential market is where most of the growth in the construction industry will occur, although several large infrastructure projects (including the continuation of work on Crossrail) will help boost infrastructure construction. With the lack of growth in PFI, in London and across the UK, it is expected that the growth in commercial construction projects will be much more modest.

What could prevent this growth?

The problem with the growth in residential construction is that it is largely propped up by government schemes. It’s unclear whether this growth is sustainable or if it’s completely reliant on the support currently provided by the government. There are also concerns about another housing bubble. It appears that the UK economy is once more growing based on debt and inflated housing prices, so could the construction industry be decimated once more should the housing bubble burst?

2014 is also the year in which the current government will attempt to appease voters in preparation for next year’s general election. While 2014 growth may be strong, will a tougher stance on austerity and corporation tax emerge after the election in 2015? Furthermore, with unemployment decreasing relatively rapidly, there’s a real chance that the Bank of England could raise interest rates – particularly in the latter half of the year. This could slow down business growth and the demand for new property.

What does this mean for your business?

The fear is that this growth is not sustainable. Businesses should be ready for expansion, but should not expect a return to pre-recession levels of growth, at least in the long term. 2014 is a key year for SMEs in the construction industry. Giving your business solid foundations and the ability to adapt to rapidly changing market conditions could be vital. If you’re based in London and the South East, you’ll continue to see the best of the growth. The apparently rapid rate of recovery is occurring from a very low base, so construction industry contractors should be aware that the industry remains fragile.

If you’re preparing your business for the expected growth in the construction industry, ensure your job costing software is up to date – saving you time (and paperwork!) when business is brisk.


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