Words: Colin Sowman The construction industry is going through a
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rough patch: some 284,000 jobs have been lost since 2008 – four times the national average. Housing starts are at their lowest level since 1923, Schools for the Future programme has been abolished, hospital building is on hold and several major highway schemes have been delayed or scrapped.
But construction is too big to write off as it accounts for 6% of the nation’s GDP, so it will always provide opportunities for the transport industry. But what’s going to happen next in the construction sector and how will that affect transport-related work?
“The best guide to what is going to happen is to understand what happened in the past, why it occurred and the effect it has had,” says Kelly Forrest, senior economist with the Construction Products Association. She says private sector construction fell by 18.2% in 2009, which was partially offset by a 7.3% increase in public sector work. One of the biggest fallers was house building, which Forrest says fell by a quarter as house prices nose-dived.
According to Nationwide, the average house prices peaked in 2007, before falling by 15.9% in 2008 and then rallying late in 2009 to show a rise of 5.9% over the year. Not surprisingly, in 2010 house building activity stirred into life again, but prices ended the year where they started. Forrest says 2010 was a relatively good year for construction with output rising by 4.5% – but it followed an 11.4% drop in 2009 – the steepest decline in more than 35 years. As house prices are predicted to remain stagnant in 2011, Forrest is more concerned about the effect of the Comprehensive Spending Review.
“This will see public sector construction fall by 8.5% this year and while it will be slightly offset by an increase in private sector work, we predict overall construction output will fall by 2% this year and a further 0.7% drop in 2012.” In fact, private sector construction is expected to increase 1.9% this year and 3.8% in 2012 before jumping 5.6% in 2013 to counteract a 7% drop in public sector work and lead the whole industry back into growth. So growth will return, but not immediately.
Work must continue
Despite what the headlines say, there is an underlying level of construction work in the public sector that must continue regardless of the financial problems faced by councils and the country. This includes repairing roads, bridges and railway lines, renewing water and sewerage systems, maintaining gas and electricity networks and upgrading flood defences. There is also a government commitment to provide broadband access for rural communities and faster line speeds for those already connected.
Work must also continue, mainly in the private sector, towards the UK’s legal commitment to reduce CO2 emissions to 80% of 1990 levels by 2050. And as buildings release about two thirds of CO2 emissions – 40% from domestic properties alone – many buildings will need to be considerably modified or demolished and rebuilt over the coming decades. The commitment also gives rise to work for specialist companies installing solar panels, wind turbines and geo-thermal systems.
People and private businesses unable to move because of downturns often decide to extend and alter the properties they already occupy. This bodes well for the smaller contractor and jobbing builders that make up the majority of those employed in the construction industry. While many of these trades people may not buy new trucks and vans, they consume materials and bolster used vehicles values. At Shoreham’s recent ‘Van tastic’ auction, most lots achieved well over their CAP average.
Against that background, CV operators may wish to target some of the specialist fields in construction, which should fare better than average by, for instance, fitting a loader crane or an access platform to their vehicle. This has to be done with careful consideration as new rules and regulations mean more training and certification is necessary (see box, p40).
But, on the other hand, this restricts market access to those with the equipment and training who have
every chance of making a good return on their investment. ■