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Construction - UK - March 2015

“The construction market consistently exaggerates economic development when there is an upturn, which often leads to prolific market growth. This inevitably means that skills shortages emerge, with material shortages also reported in the house building sector, which was the first to emerge from the previous downturn.”
– Terry Leggett Senior Analyst

This report answers the following questions:

  • How will the construction market develop over the next five years?
  • How will the general election impact demand?
  • What will be the key market drivers?
  • What sectors offer the best prospects?
  • How are company strategies being changed to accommodate market developments?

The construction market is traditionally identified as highly cyclical and trends in the sector generally tend to exaggerate overall GDP changes. The economic decline that followed the recession furthered this trend, but equally construction activity became increasingly buoyant as the economy started to improve in 2013. This continued into 2014 with a very strong performance in many construction sectors.

Construction output growth varies significantly but has been at its strongest since 2013, with output rising sharply in the middle of that year. Despite a fall in the rate of growth in Q2 2014, partly due to a very strong performance in Q1, prospects for the sector remain good with measures such as Help To Buy boosting new build housing projects.

In addition to the impact of GDP, certain sectors are significantly influenced by government policy on public spending. Previously this has often not reflected economic activity giving sectors a cushion on overall development, but the recent economic turmoil has been of such magnitude that the government has been forced to reduce public expenditure irrespective of political policy.

Home ownership fell to its lowest level in 25 years in 2012/13, while the number of private tenants overtook the number in social housing for the first time. Ownership levels have been driven down by rising prices and tougher mortgage criteria, while charities have called on the government to increase the number of affordable homes being built.

The definitions used in this report on the construction sector are from the ONS. The civil engineering sector has been excluded, but a detailed report on this sector is available separately from MBD (The UK Civil Engineering Market Development). A number of sectors are defined in the construction sector, which comprises both publicly and privately financed projects.

Public work is for any public authority, such as government departments, public utilities, nationalised industries, universities, the Post Office, new town corporations, housing associations, etc.

Private work is for a private owner, organisation or developer, and includes work carried out by firms on their own initiative. It also includes work where the private sector carries the majority of the risk/gain, i.e. in principle, all PFI contracts are private.

The sectors include the following:

  • Public sector housing: comprising housing schemes, homes for the elderly and the provision in housing sites of roads and services for utilities such as gas, water, electricity, sewage and drainage, which is financed either through local authorities or housing associations.

  • Private sector housing: comprising all privately-owned buildings for residential use, such as houses, flats, maisonettes, bungalows, cottages and the provision of services to new developments.

Public sector non-residential: which is defined as comprising a number of activities:

  • Coal mining: all new coal mine construction, such as sinking shafts, tunnelling etc.

  • Schools: state schools or colleges, including technical colleges and institutes of agriculture.

  • Universities: including halls of residence and research establishments.

  • Health: comprising hospitals, medical schools, clinics, welfare centres and adult training facilities.

  • Offices: comprising local and central government offices, including town halls, and offices for all public bodies except the armed forces and police headquarters.

  • Factories: comprising all publicly owned factories, shipyards, warehouses and skill centres.

  • Garages: comprising buildings for storage, repair and maintenance of road vehicles, transport workshops, bus depots, road goods transport depots and car parks.

  • Shops: comprising municipal shopping developments for which the contract has been let by the local authority.

  • Oil: comprising oil installations.

  • Agriculture, entertainment, communications: comprising buildings and work on publicly financed horticultural establishments, fen and agricultural drainage, and veterinary clinics. Theatres, restaurants, public swimming baths, caravan sites at holiday resorts, works and buildings at sports grounds, stadiums, racecourses etc. Post Offices, BBC and IBA installations.

  • Miscellaneous: comprising all work not clearly covered by other previously identified headings, such as fire stations, police stations, prisons, reformatories, remand homes, civil defence work, UK Atomic Energy Authority work, council depots, museums, and libraries.

Private Industrial: comprising factories, warehouses, wholesale depots, and all other work and building for the purpose of industrial production or processing, oil refineries, concrete fixed leg oil production platforms (but excluding rigs), and private steel works.

Private Commercial: comprising a number of separate sectors:

  • Offices: including all office buildings and banks.

  • Shops: comprising all buildings for retail distribution, such as shops, department stores, retail markets, and showrooms.

  • Entertainment: comprising theatres, concert halls, cinemas, hotels, public houses, restaurants, cafés, holiday camps, swimming pools, works and buildings at sports grounds, stadiums and other places of sport or recreation, and youth hostels.

  • Garages: comprising repair garages, petrol filling stations, bus depots, goods transport depots and any other works or buildings for the storage, repair and maintenance of road vehicles, and car parks.

  • Schools and Colleges: comprising schools and colleges in the private sector, financed wholly from private funds.

  • Agriculture: comprising all buildings and work on farms and horticultural establishments.

  • Health: comprising all private hospitals, nursing homes and clinics.

  • Miscellaneous: comprising all work not clearly covered by other headings such as exhibitions, caravan sites, churches and church halls.

Repair and maintenance is defined to include the following:

  • Housing: including any conversion of, or extension to, any existing dwelling, and all other work such as improvement, renovation, refurbishment, planned maintenance and any other type of expenditure on repairs or maintenance.

  • All other sectors: comprising any repair and maintenance work of any type including planned and contractual maintenance.

 

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Table of contents

  1. Executive Summary

      • The market
        • Figure 1: Development of the construction market in Great Britain, 2010-14 actual and 2015-19 forecast
        • Figure 2: Segmentation of the construction market in Great Britain, 2014
        • Figure 3: Segmentation of the R&M activity in Great Britain, 2014
      • Market factors
        • Figure 4: Development of the public housing construction market in Great Britain, 2010-14 actual and 2015-19 forecast
        • Figure 5: Development of the private housing construction market in Great Britain, 2010-14 actual and 2015-19 forecast
        • Figure 6: Development of the public non-residential construction market in Great Britain, 2010-14 actual and 2015-19 forecast
        • Figure 7: Development of the private industrial construction market in Great Britain, 2010-14 actual and 2015-19 forecast
        • Figure 8: Development of the private commercial construction market in Great Britain, 2010-14 actual and 2015-19 forecast
        • Figure 9: Development of the R&M construction market in Great Britain, 2010-14 actual and 2015-19 forecast
      • Companies
        • Figure 10: Proportional importance of different sized companies, by sector of construction, 2013
      • What we think
      • Issues & Insights

          • Why are construction growth markets now expanding beyond house building?
            • What are the major obstacles to growth?
              • How will the general election affect the market?
                • Most UK economic predictions have growth levels declining, how will this impact the market?
                  • What affect would a rise in interest rates have?
                    • What about the R&M markets?
                    • Introduction

                      • Definitions
                        • Methodology
                          • Abbreviations
                            • Market positioning
                              • Market factors and issues in the market
                                  • Figure 11: Residential property transactions in the UK, 2010-14
                              • Economy

                                • UK Economy
                                  • Overview
                                    • Figure 12: UK GDP quarterly development, 2003-14
                                    • Figure 13: UK GDP in economic downturns and recoveries since 1979
                                  • Inflation
                                    • Interest rates
                                      • House prices
                                        • Consumer spending
                                          • Manufacturing
                                            • Business investment
                                              • Figure 14: UK GFCF 2003-14
                                            • Imports
                                              • Exports
                                              • Market Size and Trends

                                                • Key points
                                                  • Market size
                                                    • Figure 15: Construction output in Great Britain, 2010-14
                                                  • Market segmentation and trends
                                                      • Figure 16: Construction output in Great Britain, by Type, 2010-14
                                                    • Housing
                                                      • Figure 17: Housing completions in the UK, 1970-2014
                                                    • Public housing
                                                      • Figure 18: Analysis of new public housing construction output in Great Britain, 2010-14
                                                      • Figure 19: Public housing starts and completions in England, 2010-14
                                                      • Figure 20: Trends in the gross supply of affordable housing in England, by tenure 2010-14
                                                    • Private housing
                                                      • Figure 21: Analysis of private housing construction output in Great Britain, 2010-14
                                                      • Figure 22: Private new housing starts and completions in England, 2010-14
                                                    • Public non-residential
                                                      • Figure 23: Long term trend in public non-residential construction activity in Great Britain, 1970-2014
                                                      • Figure 24: Analysis of public sector non-residential construction output in Great Britain, 2010-14
                                                      • Figure 25: Analysis of public sector non-residential construction in Great Britain, by type, 2010-14
                                                    • Health
                                                      • Education
                                                        • “Other” Sector
                                                          • Private Industrial
                                                            • Figure 26: Long term trend in private industrial construction output in Great Britain, 1970-2014
                                                            • Figure 27: Analysis of private industrial new construction work in Great Britain, by sector 2010-14
                                                          • Private Commercial
                                                            • Figure 28: Long term trend in private commercial construction output in Great Britain, 1970-2014
                                                            • Figure 29: Analysis of private commercial construction in Great Britain, by type, 2010-14
                                                          • Repair & Maintenance
                                                            • Figure 30: Segmentation of the R&M activity in Great Britain, 2014
                                                            • Figure 31: Analysis of Decent Homes backlog programme allocations, 2012-15
                                                            • Figure 32: Analysis of repair & maintenance output in the public housing sector in Great Britain, 2010-14
                                                            • Figure 33: Analysis of repair & maintenance output in the private housing sector in Great Britain, 2010-14
                                                            • Figure 34: Analysis of repair & maintenance output in the public non-residential sector in Great Britain, 2010-14
                                                            • Figure 35: Analysis of repair & maintenance output in the private nonresidential sector in Great Britain, 2010-14
                                                            • Figure 36: Analysis of repair & maintenance output on infrastructure in Great Britain, 2010-14
                                                          • Seasonality of sales
                                                            • Figure 37: Seasonality of public housing output, 2010-14
                                                            • Figure 38: Seasonality of private housing output, 2010-14
                                                            • Figure 39: Seasonality of public non-residential construction output, 2010-14
                                                            • Figure 40: Seasonality of private industrial construction output, 2010-14
                                                            • Figure 41: Seasonality of private commercial construction output, 2010-14
                                                            • Figure 42: Seasonality of public housing repair & maintenance output, 2010-14
                                                            • Figure 43: Seasonality of private housing repair & maintenance output, 2010-14
                                                            • Figure 44: Seasonality of public non-residential repair & maintenance output, 2010-14
                                                            • Figure 45: Seasonality of private non-residential repair & maintenance output, 2010-14
                                                          • Regional sales
                                                            • Figure 46: Regional value of total new construction output, 2010-14
                                                            • Figure 47: Regional public housing construction output, 2010-14
                                                            • Figure 48: Regional private housing construction output, 2010-14
                                                            • Figure 49: Regional public non-residential construction output, 2010-14
                                                            • Figure 50: Regional private industrial construction output, 2010-14
                                                            • Figure 51: Regional private commercial construction output, 2010-14
                                                            • Figure 52: Regional housing repair & maintenance output, 2010-14
                                                            • Figure 53: Regional public non-residential repair & maintenance output, 2010-14
                                                            • Figure 54: Regional private non-residential repair & maintenance output, 2010-14
                                                        • Industry Structure

                                                          • Key points
                                                            • Industry development
                                                              • Figure 55: Development of the construction industry, by number of companies, 2009-13
                                                              • Figure 56: Development of main trades and specialist contractors, by number of companies, 2009-13
                                                              • Figure 57: Analysis of the employment structure of the construction main trades, 2013
                                                              • Figure 58: Proportional importance of companies with up to 4 employees, by sector, 2014
                                                              • Figure 59: Proportional importance of companies with up between 5 and 9 employees, by sector, 2014
                                                              • Figure 60: Proportional importance of companies with between 10 and 19 employees, by sector, 2014
                                                              • Figure 61: Proportional importance of companies with between 20 and 99 employees, by sector, 2014
                                                              • Figure 62: Proportional importance of companies with 100 or more employees, by sector, 2014
                                                          • Company profiles

                                                            • Amey

                                                                  • Figure 63: Financial analysis of Amey UK, 2009-13
                                                                • Company strategy
                                                                • Balfour Beatty

                                                                      • Figure 64: Financial analysis of Balfour Beatty, 2009-13
                                                                      • Figure 65: Turnover analysis of Balfour Beatty by segment, 2012-13
                                                                    • Company strategy
                                                                    • Barratt Developments

                                                                        • Figure 66: Financial analysis of Barratt Developments, 2010-14
                                                                      • Company strategy
                                                                      • Lend Lease Construction (EMEA)

                                                                            • Figure 67: Financial analysis of Lend Lease Construction (EMEA), 2010-14
                                                                          • Company strategy
                                                                          • Carillion

                                                                                • Figure 68: Financial analysis of Carillion, 2009-13
                                                                              • Company strategy
                                                                              • Carillion Construction

                                                                                    • Figure 69: Financial analysis of Carillion Construction, 2009-13
                                                                                  • Company strategy
                                                                                  • Costain Group

                                                                                        • Figure 70: Financial analysis of Costain Group, 2009-13
                                                                                      • Company strategy
                                                                                      • Galliford Try

                                                                                          • PPP investments
                                                                                            • Figure 71: Financial analysis of Galliford Try, 2010-14
                                                                                          • Company strategy
                                                                                          • Interserve

                                                                                                • Figure 72: Financial Analysis of Interserve, 2009-2013
                                                                                              • Company strategy
                                                                                              • John Laing

                                                                                                    • Figure 73: Financial analysis of John Laing, 2009-13
                                                                                                  • Company strategy
                                                                                                  • Kier Group

                                                                                                        • Figure 74: Financial analysis of Kier Group, 2010-14
                                                                                                      • Company strategy
                                                                                                      • Persimmon

                                                                                                          • Figure 75: Financial analysis of Persimmon, 2009-13
                                                                                                        • Company strategy
                                                                                                        • Skanska UK

                                                                                                              • Figure 76: Financial analysis of Skanska UK, 2009-13
                                                                                                            • Company strategy
                                                                                                            • Taylor Wimpey

                                                                                                                • Figure 77: Financial analysis of Taylor Wimpey, 2008-12
                                                                                                              • Company strategy
                                                                                                              • Market Forecast

                                                                                                                • Key points
                                                                                                                  • Market overview
                                                                                                                      • Figure 78: Forecast construction output in Great Britain, 2015-19
                                                                                                                      • Figure 79: Forecast construction output in Great Britain, 2015-19
                                                                                                                    • Housing
                                                                                                                        • Figure 80: Forecast private housing output in Great Britain, 201519
                                                                                                                        • Figure 81: Forecast public housing output in Great Britain, 2015-19
                                                                                                                      • Public Non-residential
                                                                                                                        • Figure 82: Forecast public non-residential construction output in Great Britain, 2015-19
                                                                                                                        • Figure 83: Forecast of public non-residential construction in Great Britain, by type, 2015-19
                                                                                                                      • Private industrial
                                                                                                                        • Figure 84: Forecast private industrial construction output in Great Britain, 2015-19
                                                                                                                        • Figure 85: Forecast of private industrial new construction work in Great Britain, by sector 2015-19
                                                                                                                      • Private commercial
                                                                                                                        • Figure 86: Forecast private commercial construction output in Great Britain, 2015-19
                                                                                                                        • Figure 87: Forecast of private commercial construction in Great Britain, by sector, 201519
                                                                                                                      • Repair & maintenance
                                                                                                                        • Figure 88: Forecast repair & maintenance construction output in Great Britain, 2015-19
                                                                                                                        • Figure 89: Forecast repair & maintenance construction output in Great Britain, by type, 201519
                                                                                                                      • Public housing
                                                                                                                        • Figure 90: Forecast repair & maintenance output in the public housing sector in Great Britain, 201519
                                                                                                                      • Private housing
                                                                                                                        • Figure 91: Forecast repair & maintenance output in the private housing sector in Great Britain, 201519
                                                                                                                        • Figure 92: Forecast repair & maintenance output in the public nonresidential sector in Great Britain, 201519
                                                                                                                        • Figure 93: Forecast repair & maintenance output in the private non-residential sector in Great Britain, 201519
                                                                                                                        • Figure 94: Forecast repair & maintenance output in the infrastructure sector in Great Britain, 201519
                                                                                                                    • Further Sources & Contacts

                                                                                                                      • British Constructional Steelwork Association
                                                                                                                        • Chartered Institute of Building
                                                                                                                          • Confederation of Construction Specialists
                                                                                                                            • Construction Confederation
                                                                                                                              • Construction Industry Council
                                                                                                                                • Construction Industry Research & Information Association
                                                                                                                                  • Institution of Planning Supervisors
                                                                                                                                    • Major Projects Association
                                                                                                                                      • National Federation of Builders
                                                                                                                                        • Association of Building Component Manufacturers
                                                                                                                                          • The Building Centre
                                                                                                                                            • House Builders Federation
                                                                                                                                              • National Council of Building Material Producers
                                                                                                                                                • National House Building Council
                                                                                                                                                  • Trade magazines
                                                                                                                                                    • The Builder (Monthly)
                                                                                                                                                      • Builder & Engineer (Monthly)
                                                                                                                                                        • Building (Weekly)
                                                                                                                                                          • Building & Construction (Quarterly)
                                                                                                                                                            • Building News (Alt-Months)
                                                                                                                                                              • Building Research & Information (Bi-Monthly)
                                                                                                                                                                • Construction Europe (Monthly)
                                                                                                                                                                  • Construction Forum (Alternate Months)
                                                                                                                                                                    • Construction Magazine (Monthly)
                                                                                                                                                                      • Construction Manager (10 issues per year)
                                                                                                                                                                        • Construction News (Weekly)
                                                                                                                                                                          • Constructor (Monthly)
                                                                                                                                                                            • Contract Journal (Weekly)
                                                                                                                                                                              • ESI Building Products (Annual)
                                                                                                                                                                                • Housebuilder (11 issues per year)
                                                                                                                                                                                  • International Construction (Monthly)
                                                                                                                                                                                    • Premier Construction (Monthly)
                                                                                                                                                                                      • Professional Builder (11 issues per year)
                                                                                                                                                                                        • Public Sector Building (6 issues per year)
                                                                                                                                                                                          • QS Week
                                                                                                                                                                                            • Trade exhibitions
                                                                                                                                                                                              • 100% Detail
                                                                                                                                                                                                • INTERBUILD
                                                                                                                                                                                                  • National Event for Construction (SED)
                                                                                                                                                                                                    • Social Housing Exhibition
                                                                                                                                                                                                      • National Homebuilding & Renovating Show

                                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                                      To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                      Construction - UK - March 2015

                                                                                                                                                                                                      £995.00 (Excl.Tax)