No matter your politics, the news is good for the construction industry as we now have a government with the majority necessary to drive through Brexit and stop all the uncertainty. Plus, the Conservative government has pledged a commitment to a substantial increase in public sector expenditure, including increased investment in the built environment.
Following the recent general election result, construction sector analysts, Glenigan have taken the news positively by announcing an updated rise in their Construction Industry Forecast for 2020-21. Even though it will take time for the additional public sector funding projects to start the updated forecast now indicates a 2% rise in the value of underlying project starts in 2020 and a further 5% in 2021 for the construction industry.
So, in what areas is growth predicted?
The key areas of housing (both private and affordable homes), education, health and civil engineering works are predicted to have the most growth. Civil engineering construction is set to benefit with extra funding planned for Highways England and Network Rail and existing major infrastructure projects across the UK, including the Thames Tideway, Hinkley Point, Stonehenge Tunnel as well as the HS2 rail link. After an estimated 25% rise in the value of affordable housing this year, Glenigan has predicted further growth in the sector for 2020 and 2021.
It is also forecast that school building starts will rise 8% next year and by a further 7% in 2021 as the need to build new schools, to tackle a shortage of secondary school places, bolsters construction in the education sector, particularly in London and the major cities. Health sector construction is also set to benefit from a boost in NHS funding although the lack of current new projects in the development pipeline is expected to limit initial sector growth to just 3% next year. The London commercial office space sector is also predicted to be positive as the value of new office project starts in the capital has risen by 16% so far this year.
New construction in the warehousing/logistics sector is expected to remain positive as more and more online retailers need warehousing and distribution space throughout the UK. Planned expansion by major hotel chains throughout the UK should also help sustain construction activity in the hotel and leisure sector. In the private housebuilding sector, the West Midlands is expected to provide a hotspot driven by investment for the 2022 Commonwealth Games to be held in Birmingham.
However, in contrast, although student accommodation work has been an important growth area for the sector in recent years it has faltered during 2019 and is predicted to remain subdued for 2020 meaning the overall value of social housing will dip next year before rebounding in 2021. The last few years have been tough on our industry and although we are all still holding our breaths a little, things definitely look to be on the up, which is a good thing for everyone. The construction industry will as always continue to play a key role for the government through its impact on GDP and economic growth that as we all know goes well beyond the direct contribution of construction activities and the jobs it provides.
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