2019 is looking like another challenging year for the construction industry in the UK, with only a slight improvement on 2018’s performance. Total new work is forecast to grow by 0.9%, which is just below forecast GDP growth at 1.2%. Repairs and maintenance is expected to grow by a similar amount.
UK Construction trends by sector
According to Experian, private housing output will be flat in real terms alongside a decline in public housing. Public non-residential is also flat at 2%, with private commercial work falling by -7%. Performance this year is underpinned by a forecast 10% growth in infrastructure output at 10%.
Looking to 2020, we expect growth of 2% overall, so flat in real terms. The main change is expected to be 5% growth in public housing. The diagram below shows the forecast for growth in the construction sector up to 2021.
Source - Experian
Output is expanding significantly in infrastructure. Housing and private industrial sectors are also expanding, but private commercial will continue to decline overall.
Emerging themes for 2019 and beyond
There is much change in our industry, and we have drawn out some themes we believe are important in 2019 and beyond.
Skills & labour shortages
Labour shortages are prevalent in both professional services and construction skills. This is not a new issue but is exacerbated by the uncertainty in freedom of movement for EU resources. Scarcity of labour with the ongoing demand means costs are rising. Greater effort is being made to attract people into the industry but there is a lag as people are trained and learn the skills required.
Data driven construction intelligence
Data analytics is playing an ever-more important role in construction. The digitisation of systems, processes and tools means data is easily collected and integrated. Emerging technologies to leverage that data will enable innovation and disruption in the industry. Those consultants, designers and contractors not investing in this area risk being left behind in what increasingly seems like a race to innovate and disrupt traditional approaches.
Digital transformation and leveraging technology
The construction industry is going through a digital revolution. Perhaps slower than some other industries, but it is happening. The new technology emerging improves all aspect of the industry whether asset management (EAM & IoT), design (BIM, VR, AR), surveying (drones, handheld tech), PPM (management & collaboration systems, benchmarking, prediction), construction (off-site & on-site controls & techniques).
Modern Methods of Construction
Modern methods of construction, in particular of-site construction, modular buildings & factory fabrication are growing significantly. This is enabled by digital technology and growing investment and capacity in off-site construction. Contractors are embracing this and bringing pre-fabrication in-house as they invest in their own central modular construction and pre-fabrication facilities.
Despite an increase in new orders and higher overall employment figures, the industry has not yet recovered from the Carillion shock of last year. Other large contractors are in trouble. The number of construction insolvencies has not abated, with the number of insolvent firms doubling since 2016.