Previously on the Integrity Software blog, we looked back at 2015 and found that it had mostly been a good year for construction companies, but industry growth hadn’t been as strong as expected. Nevertheless, in a poll on Building.co.uk, 76% of respondents said that the UK construction industry was in a stronger position at the end of 2015 than it had been at the start.
Now let’s turn our attention to 2016 and what it may hold for those of us operating in the construction sector. Will it be another rosy year for construction or are there clouds on the horizon?
Economic forecasting tends to be more of an art than a science, but it’s always worth a glance at the figures that the experts publish. Experian predicts a 3.6% growth in construction output during 2016 while the Construction Products Association is a little more optimistic with a 3.8% rise. It’s worth noting that both organisations had to revise down their figures for 2015 – so take these 2016 forecasts with a hefty pinch of salt.
Sector by sector
Infrastructure was one of the big winners of 2015, with projects such as Crossrail edging towards completion. Using data from the same Experian and CPA forecasts, during 2016 infrastructure growth is expected to be 5-7.6% (compared with 13.2-25% in 2015). 2016 is something of a quiet year for large infrastructure projects – but 2017 is more promising with work for HS2 and Hinkley Point expected to commence. The commercial sector is forecast to see strong growth of 7%, whilst private housing growth will be 5%. Public sector housing starts are predicted to decrease by between 5 and 10%.
There will be two main political sources of uncertainty this year – the London mayoral election and the buildup to the EU referendum (which could be held in 2016 itself). On the 5th of May, London will decide who will be their next mayor. As a general rule, it’s likely that business would prefer another Conservative mayor, but both of the main contenders are against Heathrow’s expansion.
It is generally expected that the EU referendum won’t take place until 2017, but regardless of the date, the uncertainty the looming poll will generate will be significant. Larger construction companies in particular may delay expansion and investment until the result of the referendum. Current Brexit polls show ‘in’ and ‘out’ as neck and neck.
A time for optimism?
Overall, construction forecasts for 2016 appear more cautious than those for 2015. With China’s slowing growth, rising interest rates in the US and continuing instability in the Middle East (and the knock-on effects in Europe), the global economy is not at its strongest. It’s difficult to predict the chances of another crash, and regardless, there’s little you can do to mitigate the effects.
Nevertheless, with housing firmly on the political agenda, shakeups to planning law and low business taxes, the UK is currently a great environment for many construction companies to operate in.
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