The UK construction industry has staged an impressive recovery this year: according to the Office for National Statistics (ONS), the construction industry grew by 20.4% year on year in the first half of 2021. The figure reflects significant growth in the second quarter, which contrasted with the sharp contraction in the same period of the preceding year because of lockdown.
According to a new report from Research and Markets, titled Construction in the United Kingdom (UK) – Key Trends and Opportunities to 2025, the growth of the market is expected to continue, driven by house building and the resumption of major infrastructure projects. However, the report notes that there are challenges due to global supply chain disruption, which has pushed prices up and limited supplies of some materials.
Similarly, information provider IHS Markit reported that the construction market expanded in June at the fastest pace since June 1997, thanks to a sharp rise in new orders, but suppliers’ delivery times lengthened due to a shortage of products and materials, and purchasing prices rose.
Looking forward, the Research and Markets report anticipates an annual average growth of 4.1% between 2022 and 2025, supported by growing investor confidence and investments in transport, renewable energy and residential projects.
It anticipates that commercial construction will recover steadily following Chancellor Rishi Sunak’s announcement in January 2021 of a spending package worth £4.6 billion, under which businesses in the retail, hospitality and leisure sectors can claim grants if they have been impacted by the lockdown measures.
Meanwhile, in a bid to solve the UK’s housing shortage, the UK Government is making planning system changes aimed at streamlining the planning process in England, and in 2020 the government announced a £12.2bn investment in building affordable homes.
IHS Market reported that in June, house building construction work increased at the fastest pace since November 2003 driven by the reopening of the UK economy, and total new orders had increased in each of the past 13 months.
In Wales, a 2020 government document titled Building Better Places: The Planning System Delivering Resilient and Brighter Futures emphasised the need to increase housing output by focussing on building new social housing. The Welsh Government’s 2021-2022 budget pledged an additional £100m for its social housing programmes. This brings its total investment in the Social Housing Grant to nearly £250m for 2021-22, and sets out to support jobs and training opportunities for Welsh SME builders and localised supply chains.
In August, Minister for Climate Change Julie James launched a new standard for building affordable homes in Wales, the Welsh Development Quality Requirements 2021, which set out new quality requirements addressing flexibility, space and sustainability as well as requirements for low carbon design and fossil-fuel-free heating.
The Welsh Government has also pledged an additional £10m financial transactions capital in its Land for Housing Scheme to boost the supply of affordable and market housing and improve the rate of delivery by securing land sites. In addition, it sets out to support the creation of local jobs and training opportunities, and to support the housing development supply chain.
The impact of Brexit
Brexit is set to continue to impact the construction industry for some time to come: the government says the UK labour market is recovering, but with access to overseas labour likely to remain a challenge, the sector could still be affected. Additionally, EU import/export costs and administrative delays are likely to continue to impact the supply and cost of construction materials and plant.
IHS Markit noted that while construction companies in the UK are optimistic about growth, confidence has been dented by concerns about labour availability and the sustainability of the recent surge in demand.
2022 looks likely to be a period of rapid evolution for the construction industry. While growth is on the cards, the gremlins of supply chain issues and labour shortages will not quickly go away. Massaged by government spending, infrastructure projects and home building look set to flourish – but the new face of the post-Covid, post-Brexit industry is still emerging.