Construction Spending Insights for 2020

Brexit’s Impact on UK Construction Sector

 

Glenigan forecasts that 2020 will see a 2% growth in the construction industry after falling 9% in the past 2 years. 2021 is forecast to see a further 5% growth.

Glenigan makes the claim that the rise in construction projects is dependent on a Brexit agreement. If discussions continue or no-deal is reached, this could be dramatically different and would have a disruptive impact on the UK economy. Following December’s election, this uncertainty seems less likely. A win for the conservatives means Brexit is meant to happen before January 31st and makes the Glenigan forecast seem likely.

A conservative majority means a push for the Brexit deal which will see a substantial increase in public sector expenditure. The uncertainty of Brexit has taken its toll on the construction industry, but the result of this election ends the uncertainty. As we enter 2020, with Brexit looming, it is likely the beginning of the year will see a decline in activity specifically post-Brexit. But this should stabilise going into 2021.

Brian Berry, Chief Executive of the FMB sees the election result as being a ‘golden opportunity’ to achieve Brexit and begin building the homes and infrastructure Britain needs.

Government Spending

UK Construction Sector

Government spend on civil engineering is set to increase, specifically targeted at Highways England and National Rail. Unlike the overall industry, civil engineering had grown by 22% in 2019 and Glenigan predicts it will rise a further 5% next year. There are various projects underway in the civil engineering sector which should see construction activity sustained. Projects currently underway include the Thames Tideway and HS2.

Private and Affordable Housing

In their 2019 election manifesto the Conservatives pledged to renew The Affordable Homes programme. The programme aimed to increase the supply of shared ownership and other affordable homes in England by 2021. The renewal of this programme would mean more new homes being built to keep up with demand and subsequently lead to an increase in the growth of the construction industry. Housebuilding is one of the construction industry’s biggest outputs and therefore it is relied on quite heavily.

Buyer Confidence

As a result of the 2022 Commonwealth Games in Birmingham, the West Midlands is expected to be a hotspot for private housebuilding. This year there was an estimated 25% rise in the value of affordable housing which is expected continue to rise over the next two years. With the assistance of a predicted rise in buyer confidence over the next year, the value of private house is expected to rise by 9% and then by a further 10% in 2021. An increase in buyer confidence is a positive for the construction industry, and usually means an increase in extension works and refurbishments as people look to put their own stamp on their new home.

Commercial Construction

In the capital, commercial construction has continued to grow and looks set to carry on. In addition to various new office projects there are also major expansion plans for hotel chains in the city and the level of planning approvals particularly in London has created a pipeline for commercial construction activity in 2021.

Conservative Manifesto and Construction

The Conservative Manifesto outlined the promises the Conservative government made to the British public should they get elected. In the aftermath of the election and with the news that the Conservatives hold a majority in parliament, we can look to their manifesto to understand these promises and begin to understand what the next 4 years of a Conservative government is going to produce for the construction industry.

  • A promise to support community housing through assisting self-builders find land and provide them with access to the help to buy scheme.
  • Continue with a plan to build 300,000 more homes a year, which they hope to achieve with Brexit uncertainty due to be ending.
  • Pledge £25bn on upgrading the roads of Britain based on the understanding that well maintained roads are crucial to the economic productivity of the UK.
  • The Conservatives are committed to large infrastructure projects such as NPR (northern powerhouse rail). Such projects are projected to help stop falling growth in the construction industry.
  • To underpin national renewal, they will invest £100 billion in additional infrastructure spending.
  • They aim to continue their support of the building of social housing.
  • They aim to renew the Affordable Housing Programme which aims to create more shared ownership homes and other similar programmes which help people buy houses.
  • Aim to create houses which are built to be more environmentally friendly.
  • Help employers invest in the skills of their workers.
  • National Skills Fund worth £3 billion for apprenticeships and students to help with infrastructure projects.

Effects of the Election on Construction

Political parties make a lot of promises in the lead up to an election, and although this election was nicknamed ‘the Brexit election’, the housing crisis also played a large role. Housing was a big talking point among the different political parties but moving forward the only promises which matter are those made by the winning party therefore that is what needs to be examined.

With many promises made to create large scale and local infrastructure projects, it looks positive for the construction industry and supports the predictions made by Glenigan in terms of the forecast for the construction industry in 2020 and 2021. With investment in this sector promised, the construction industry can be hopeful that it will see improved growth over the next two years.

With housebuilding a key output for the construction industry, it is one of the biggest concerns to come out of the election. Luckily for the industry the new government promises to continue to build affordable housing and to continue with their promise to increase housebuilding. It is to be hoped that with the promise to end Brexit uncertainty that this promise can be kept.

With so many promises to increase construction activity in the coming years, it is important to consider the skills shortage which is also apparent within the industry. To tackle this and to help the industry to continue to grow. The manifesto promises a National Skills Fund worth £3 billion which would help to recruit apprentices and workers and ensure they have the skills required to work within the industry.


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Lauren King


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