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Chapter 4
KNOWLEDGE CENTRE 2013 2
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Contents
United Kingdom
UK Market Review
3
UK Construction Output
4
Public & Private Sector Output
4
Forecast Construction Activity Output 2013-2015
5
UK Tender Price Index
5
% Change in Tender Price Index
6
Forecast Annual % change in Tender Price index
6
Resource Cost Index
7
UK Regional Tender Price index
7
Employment in Construction
8
Standard Hourly Base Rates for Labour
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Top UK Main Contractors
9
Top UK Architects
9
Top UK Engineering Firms
10
Bruce Shaw Average UK Construction Costs 2013
10
House Building Starts & Completions
12
Material Price Fluctuations
12
Average Procurement Lead-in Time (weeks)
13
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UK Market Review
In the UK, 2012 featured a number of significant public events which helped to raise the national morale including the Diamond Jubilee of Queen Elizabeth II and the London Olympic Games and these national occasions provided a sense of optimism while in reality, the Construction Sector continued to have a challenging time. The Construction Industry impact from the Olympics had ended earlier and there was little that had arrived to replace it. Towards the end of 2012 the UK Construction Industry was not performing well and while it only comprises 8% of GDP, its precarious status led to an overall lack of confidence in the economy and there was still unwelcome talk of an un-precedented triple dip recession.
As a result, the prospects for 2013 remain challenging and do not indicate any significant improvement in
construction activity. Unfortunately while some parts of the construction market including infrastructure (specifically Crossrail in London and HS2) are positive, much of the remainder of the construction industry remain flat. The continued pressure on the nations disposable income means that retail growth is marginal and that significant investment in retail expansion is not apparent but there is some evidence of investment by the national retail chains in improving and upgrading their existing stores.
The continued combination of factors such as the lack of access to debt finance for development, the lack of mortgage availability for new house purchasers (despite a number of government initiatives), the lack of grant funding from the HCA for affordable homes (again despite some kick-start schemes) as well as rising inflation continue to keep the prospect of a sustained construction sector recovery subdued.
The UK Government austerity spending cuts announced in late 2010 have continued to make an impact on the sector during 2012 and this will continue through 2013. This places more pressure on the Private Sector to make up some of the shortfall which it just cannot do. We are continuing to predict that the ongoing lack of bank financing for property development along with stricter lending conditions will continue to constrain speculative private development in the commercial and residential
sectors and will therefore continue to restrict growth in the private sector.
In terms of national Construction Output, after a dip during 2010 according to the Construction Products Association (CPA) and a rise in 2011 of around 4%, the industry dipped again in 2012 by 9.8% and is expected to decline further by 2% in 2013. In terms of specific impact, 2012 saw a 20% reduction in Public Sector housing spend, a 15% reduction in road and civil infrastructure spend and a 5% drop in Private Sector housing spend. Health and Education spends are also down by up to 10%.
Despite the rise in inflation in 2012 to 4.1%, we have not seen in 2012 the increases in material costs translating into equivalently higher tender costs as contractors continue to absorb the bulk of increased costs before passing them on to Clients in tenders. For Clients wishing to commission construction work, it continues to present a great opportunity to secure extremely competitive prices. We have seen tender prices largely remaining stagnant in 2012 and believe that in 2013, they will remain fairly static or increase modestly. However the compounded effect of increases in raw materials, a potentially smaller supply chain and wage pressures is generating a belief that tender prices will begin to escalate slowly from early 2014. The continued absorption of material price increases by contractors will lead to a continuation of the demise of some contractors and unfortunately this is likely to continue through 2013.
Despite the negatives above, there are likely to be some bright spots including London and south-east residential (particularly the super prime sub-sector), energy, budget hotels, data-centres and rail infrastructure. The modest pick-up in housing starts will enable some parts of the industry to enjoy increased activity in 2013. In terms of regions, the south-east and particularly London are enjoying significantly more activity while the other UK regions particularly Scotland and Northern Ireland are seeing little improvement in activity. The modest recovery in the commercial sector, particularly in London should continue as a number of high profile projects have recently been awarded and are due to start on site in the coming months.
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UK Construction Output
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Forecast Construction Activity Output 2013-2015
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% Change in Tender Price Index
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Resource Cost Index
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Employment in Construction (000’s)
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Top UK Main Contractors
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Top UK Engineering Firms
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KNOWLEDGE CENTRE 2013 12
