The Future of Construction in the United Kingdom (UK) to 2015
The outlook for economic recovery in the UK will remain uncertain until the end of 2011, with recovery dependent on exports and the ability of the private sector to create domestic jobs. With the backdrop of the uncertain economic scenario, the UK construction industry demonstrated marginal growth of 1.3% in 2010 after recording a steep decline in 2009. Owing to consecutive declines in 2008 and 2009 and marginal growth in 2010, the overall construction industry recorded a CAGR of -0.24% during the review period. Government support through stimulus packages and investment in infrastructure development proved helpful for the infrastructure market which, along with other construction markets, recorded single-digit growth during 2010. Timetric estimates that the overall construction industry will record a CAGR of 3.64% for the forecast period.
Residential construction was the largest market and recorded a CAGR of -3.17% during the review period. This steep decline was due to the postponement of new building projects and a lack of funding options for buyers. Despite government efforts such as reducing stamp duty and supporting first-time buyers, the market recorded a poor performance during 2009–2010. However, activity in the residential construction market started to revive from the last quarter of 2010 as a result of the early signs of economic revival in both the UK and the eurozone. The residential market in London is experiencing a strong revival in demand because of its strong image as a vibrant global financial market. Timetric forecasts that the residential construction market will continue to recover in 2011 and achieve a CAGR of 2.97% during the forecast period.
Commercial construction was the second-largest market with a share of 28.9% in 2010 and recorded a CAGR of ‑0.17% over the review period, primarily due to the steep decline in both office and retail construction in 2009 and the first half of 2010, from the peak of 2008. However, the market has experienced a marginally more positive performance from the second half of 2010, with strong growth in office and retail buildings. The market is estimated to record a CAGR of 4.42% during the forecast period, primarily driven by retail and office construction.
With a CAGR of -9.42%, the industrial construction market recorded the highest decline during the review period. Although the market registered a modest growth of 4.0% in 2010, the steep decline in 2008 and 2009 limited the overall growth figure during the review period. With growth returning in the region, the industrial construction market is estimated to achieve a CAGR of 5.23% during the forecast period.
The infrastructure construction market recorded the highest CAGR of 6.25% within the construction industry during the review period. The 2012 Olympic Games in London are likely to be the main growth driver for infrastructure construction and regeneration initiatives. Driven by railway and other infrastructure projects, the market is expected to register a CAGR of 5.07% over the forecast period.
Supported by higher healthcare spending in the UK, institutional construction emerged as the second fastest growing market during the review period and recorded a CAGR of 4.94%. However, shelved educational buildings projects and reduced university capital projects are likely to affect the market’s future performance. Timetric estimates that the institutional construction market will record marginal growth, with a CAGR of 2.21% over the forecast period.