The UK Construction Industry’s Decline

There is some bad news for those of you who step into your protective overalls for a day on the construction site every morning. Research by the Construction Products Association (CPA) has shown that the construction industry is going to continue declining for three more years. Output is expected to fall by almost ten percent this year and another four percent the following year. This forecast is much grimmer than previous reports and if this decline happens as predicted, it will be the biggest decline in 30 years.

Chief executive of CPA Michael Ankers said, “The speed of decline is having a dramatic effect on many parts of the construction industry and is being driven by an unprecedented reduction in private sector investment resulting from the credit crunch and economic downturn.”

The credit crunch is affecting all business sectors, particularly the motor and real estate industries, and the construction industry is certainly no exception. The house building and repair sectors are the hardest hit with house starts expected to fall to their lowest level since the fifties and maintenance and home improvements expected to fall by 15 percent this year alone.   

In addition to this grim forecast, past construction output speaks volumes. In the last three months of 2008, construction output in the UK came to £19.3 billion which is £1.5 billion down from the same time period in 2007. However, the total output for 2008 was pretty much on par with the total output for 2007.

Yet, construction output in some areas is likely to increase in the following years. Rail construction work should increase dramatically in the next five years; the CPA report has predicted that it will increase by 190%. In addition to this, public construction that is not housing-related will go up by over 20 percent in the next two years. Michael Ankers has asserted that the only sectors where construction output is forecast to increase are linked to public spending.

Spending on construction for education is expected to increase by nearly 30 percent in the next two years, mainly thanks to the Building Schools for the Future programme. The construction industry is relying heavily on public spending during the recession. Luckily for those employed in the industry, spending on public construction projects creates significantly more employment than other sectors of the industry and mainly British products are used. This is truly the silver lining of the recession storm cloud for the industry and the well-developed British public sector is to thank for this.