Improving prospects for the construction industry says report

Latest News | Property & Construction | South West
Tim Scruton
Tim Scruton

Property consultant GVA has just published its latest Building Bulletin, summarising the Construction Outlook going into 2014.

The review looks at the economic property market outlook for development, the movement in material prices, labour costs and tender prices, and the medium term outlook for the sector.

The overriding sentiment is positive, with prospects for the construction industry having improved over the past 6 months.

Following a small fall in output in 2013, GVA expects modest growth in 2014, with improved growth between 2015 and 2017.

Tim Scruton, Regional Director of the Building Consultancy team at GVA’s Bristol office comments: “When finalising the latest Construction Outlook, it was interesting to look back over previous reviews.

“Because we could see the effects on the industry through the depths of the economic downturn, with weak economic growth and static capital value increases forcing development activity to grind to a halt.

“Over the last 6 months, economic news has markedly improved with above trend economic growth.

“Development activity in London has strengthened further in 2013, with office and residential construction at a high level, reflecting strong occupier demand.

“Outside London, the picture had been very different, but over the last 6 months construction activity has increased, particularly in the residential sector.

“Rising capital values, low tender price inflation, supply shortages and increased availability of finance have all played their part”.

According to the Construction Products Association, the positive economic outlook should translate itself into growth in construction output in the years to come.

An overall fall of 0.5% in construction output in 2013 is forecast to be followed by 2.7% growth in 2014 and almost 5% growth over the subsequent 3 years to 2017.

GVA expects private housing and infrastructure to provide the initial drivers of growth, while commercial activity, accounting for a fifth of all construction output, will start to show significant growth by 2015.

Public sector construction is reaching the bottom of the cycle and is forecast to resume a modest level of growth by 2015.

Information published by the RICS through its Building Cost Information Service (BCIS), indicates tender prices have shown an increase of approximately 1.7% in the year to date and are forecast to increase by 3.4% during 2014, with longer term growth of up to 8% per annum by 2017.

Tim concludes: “Whilst confidence is returning, any increase – whether in activity or cost – is coming from a low base as construction has been hard-hit by the downturn.

We feel this is likely to translate to zero and small margins, with the days of contractors buying work receding, though it could take up to five years for the industry to return to pre-recession levels if at all.”

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