What is happening in Construction?
The economy has been cheered by the estimated Q3 growth figures for the UK with a 1% increase in Gross Domestic Product overall.
One of the amusing quotes I read about the Q3 figures was from Graeme Leach, Chief Economist at The Institute of Directors who said on hearing the news:-
“The key message is that we’re out of recession, but uncertain where we’re going”.
The really disappointing fact in the GDP figures though was the continuing decline in the construction industry. The Q3 figure showed contraction of 2.5% which is sad on its own but very worrying on the back of a decline in Q2 of 3% and a fall of 4.9% in Q1 of 2012.
For our business as Surveyors, Planners and Project Managers, construction is a large part of what we do. Whilst we act nationally we do see some of the regional variances in the strength of the economy too. We work for instance, in Scotland, with firms involved in the oil and gas industry. We also work with national retailers and a good cross section of the Banks. We are in a good position therefore to comment, and are central to the national economic trends.
Why has construction fallen over 10% this year? Well public expenditure cutbacks certainly matter, as does the continuing credit crunch. You have to read what some of my agency colleagues say though about the lack of speculative development on the market to see that it is little wonder that the construction sector is in such a deep recession of its own.
This decline in 2012 may well be as a result in the ‘sugar rush’ projects of the last few years – the major PFI projects and the Olympics. It may be a return to normal levels of activity.
Whilst we have construction and development projects on site as well as in the pipeline we are going to need to see a resurgence in the sector very soon. This may come from several areas but a loosening of credit will be essential.
The good factor for the ‘consumers’ is that there has perhaps never been a better time to roll out expansion plans and build new facilities or extend existing properties.