The European Construction Sector Observatory examines the performance of UK construction and what the future holds for the sector
The UK construction sector improved its economic prospects substantially in 2014. Predicted growth for 2015 was estimated to be close to 3%, with the housing and infrastructure sub-sectors being ahead of the recovery in the short-term. UK construction output is forecasted to rise until 2025, with an average 2.1% annual growth rate. The strongest growth is expected in the housing segment, with an annual growth rate of 2.4%, whereas the non-housing segment is likely to average at 2.1% per annum. Infrastructure is estimated to be the slowest growing segment over the 2012-2025 period, with annual growth averaging at around 1.4%.
Fragmented UK construction sector
The UK construction sector is fragmented in the sense that companies tend to specialise in one type of construction area, such as residential buildings or hospitals, despite many skills being transferable. The sector is mainly focused on the domestic market, despite the availability of support measures to help companies to access foreign markets. UK construction exports tend to target English speaking Commonwealth countries, with whom the UK shares a similar legal framework, business models and cultural links.
Demand for housing still outstrips supply, despite the recovery of the residential construction sub-sector. In addition to the existing demand for housing, estimates indicate that 55,000 new housing units per year will have to be built to meet extra demand in the coming years. There is also a need for government measures to support greater energy efficiency in existing and new housing and to increase the supply of quality and affordable housing.
The challenges to recovery
With the exception of the residential sub-sector, the construction sector is still recovering from the crisis. To tackle the sector’s key challenges, including the skills shortage and a lack of awareness of alternative financing options, the government launched the Construction 2025 Industrial Strategy in 2013. This national strategy is implemented in parallel with the EU’s Construction 2020 Strategy.
As part of the broader Green Deal Scheme, the government launched the Green Deal Home Improvement Fund in 2014 as a financial incentive scheme to encourage homeowners in England and Wales to make energy saving home improvements and to assist them with the cost of installation. Despite being very popular with homeowners, demand for other Green Deal schemes was disappointing, which ultimately led the government to end all Green Deal funding.
To deliver a sector-based approach to local skills needs, the Construction Industry Training Board launched the Construction Skills and Employment Programme as a joint investment public-private partnership in 2013. It aims to provide an improved approach to funding for the delivery of construction skills and growth to nine core UK cities, and it involves local employers in decisions on how to use funding to meet local needs and drive local growth.
ESCO
The European Construction Sector Observatory is helping the construction value chain to confront the economic and social challenges that impact the construction industry. Through regular analysis and comparative assessments, the initiative aims to inform European policymakers and industry stakeholders on the market conditions and policy developments in the European construction sector. The key outputs of the Observatory include Country Fact Sheets that profile and analyse the construction sector in each Member State, Policy Fact Sheets on key sector-related policies in each Member State, and a series of Analytical Reports on the implementation of Construction 2020 Strategy objectives.
Visit the Observatory website to download analytical fact sheets and reports on the UK and other Member States, and gain insight into the European construction sector.
European Construction Sector Observatory
grow-construction@ec.europa.eu
www.ec.europa.eu/growth/sectors/construction/observatory_en
