Recently Chancellor Philip Hammond announced a £31 billion fund to increase capital expenditure in the field of housing, research and development, and economic infrastructure including transport and digital communications. This fund has been announced with the pledge to ‘invest today for the economy of tomorrow’. Of the £31 billion, £11.5 billion is demarcated for housing, £7 billion for R&D, £4.9 billion for transport and £740 million for digital infrastructure to be spent between 2017-18 to 2022-23. With almost 37% of the fund demarcated for housing, this is a specific move to give boost to the UK construction industry which has been on a consistent recessionary path.
Post financial crisis, declining productivity in UK in comparison to its other trading partners such as France and Germany, has amongst other sectors of the economy also had an impact on the construction sector. An effective solution is in the form of automation which promises to increase productivity and improve efficiency, however it comes with its own set of challenges. An important question at this point is: how has the industry performed and what do experts propose on dealing with its most pressing issues?
UK construction industry: recent performance
Construction industry in Britain is facing a consistent slowdown with output contracting for the sixth consecutive period. According to the ONS, construction output fell by £553 million or 1.4% in the three month on three month time series in October 2017. The decline in construction output is derived from falls in both ‘repair and maintenance’ and ‘all new work’ which fell by 3% and 0.6% respectively. Private industrial work and public and private housing construction were the only sectors which posted a combined increase of £160 million. The UK government’s Help to Buy equity scheme has made residential property a bright spot for the industry in recent months.
Besides measuring the state of the industry through construction output, another important indicator specifying growth in the construction industry is the magnitude of ‘new orders’. Construction ‘new orders’ registered a quarter on quarter growth of 37.4% predominantly due to 174.5% growth in infrastructure which stems from the awarding of main civil engineering contracts for the stage one of the high-speed rail project. Without this growth there would have been an overall contraction due to a substantial fall in electricity projects.
Overall, eminent think tank Timetric’s Construction Intelligence Centre have forecasted to see modest growth across major markets in western Europe in 2017. More importantly, the centre believes that the UK construction sector is being weighed down by political and business uncertainty. This is due to the uncertainty regarding the course of mediation that the Brexit talks will undertake and the resulting future relationship the country would have with Europe. Of particular importance in terms of the construction industry is the implication of the negotiation process on the visa process for low skilled workers from Europe. This became the subject of much debate in a recent conference, Skills Shortage in Construction: Building the Future Post Brexit, organised by the Bartlett School of Construction and Project Management, UCL in collaboration with History & Policy on 5 October 2017.