Construction sector growth shows signs of cooling

Published:  23 January, 2015

Growth in the construction sector is showing signs of a slowdown according to a report released yesterday (22 January, 2015).

While 2014 saw an increase, with the sector expanding by 2.8% on the previous year, when compared to the 25.2% rise in 2013, it is clear that the pace of growth has slowed.

The report from Barbour ABI, which is a chosen provider of construction data to the Office for National Statistics (ONS) and the government, cites the slowdown in growth in the residential sector as one of the major reasons for this, which after a rapid rise in 2013, has tailed off.

Michael Dall, lead economist for Barbour ABI, explained: “Comparing contract values in 2014 against 2013, there is an increase of 2.8%. While this is still an improvement, when you contrast this percentage change against 2013 versus 2012 where there was a 25.2% increase, and 2012 versus 2011 where there was a 29.1% rise, it’s clear that the rate of growth is much more moderate.

“The prominence of the housing sector in the industry is one of the key contributors to this drop off. Over the past couple of years, we’ve seen housing projects dominate – in 2014 for example, the market represented just over a third of all contract value. So, while buoyancy in the residential sector helped to drive growth in 2013, our reliance on this sector meant that as the rate of growth slowed in housing in 2014, it had a significant impact on the industry’s UK wide performance.

“A decline in the infrastructure sector is also having a substantial effect. With an election looming and political uncertainty increasing, 2014 has seen fewer big budget projects awarded. In fact, infrastructure has seen a 29.7% fall in contracts, compared in 18.8% growth in 2013, and looking further ahead, there’s also fewer schemes in the pipeline.”

The figures from the Barbour ABI Economic & Construction Market Review also show London’s continued prominence, with the Capital accounting for 24% of the total value of UK construction contracts in 2014. This is closely followed by the south east at 12% and Scotland at 11%. The north west, which has featured heavily in pre-election discussions, came in fourth at 10%, with the region attracting significant investment via the implementation at a Smart Motorway scheme worth £184m.

Report highlights:

  • The total value of new UK construction contracts awarded in 2014 was £64.8bn – an increase of 3.7% compared to 2013.
  • The number of construction contracts awarded in 2014 was 12,440, a 10.4% increase on 2013. This is a lower rate of growth than 2013 (21%) and 2012 (22.7%) but still shows an upward pattern in the industry.

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