September 2014
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SEPTEMBER 2014 Economic Context The Construction Sector Sectors in Detail Major announcements and The main economic headlines in the A closer look at changes in the developments in the UK economy construction industry this month. major sectors within the industry this month. this month. SEPTEMBER 2014 SKIP TO THIS SECTION SKIP TO THIS SECTION SKIP TO THIS SECTION To navigate just click on the tabs, FULL VERSION – AVAILABLE TO BARBOUR ABI CUSTOMERS & BUILDING SUBSCRIBERS ONLY buttons or page numbers and they will take you directly to your chosen section. About Us Economic Context The Construction Sector Residential Infrastructure Commercial & Retail Hotel, Leisure & Sport Industrial Medical & Health Education Hinderton Point, Lloyd Drive, Cheshire Oaks, Cheshire, CH65 9HQ T: 0151 353 3500 E: [email protected] @BarbourABI 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ABOUT US SPECIALIST PROVIDER OF SEPTEMBER 2014 CONSTRUCTION INTELLIGENCE To navigate just click on the tabs, buttons or page numbers and they will take you directly to your Barbour ABI UBM chosen section. Barbour ABI is a leading provider of construction intelligence UBM helps businesses do business, bringing the world’s buyers services. With a team of in-house research specialists and a and sellers together at events and online, as well as producing and About Us dedicated lead economist, it provides commercially relevant insight distributing news and specialist content. Its 5,500 staff in more and unique analysis of trends and developments within the building than 30 countries are organised into expert teams which serve Economic Context and construction industry. Barbour ABI is the chosen provider commercial and professional communities, helping them to do of industry data and indicators for Government bodies including business and their markets to work effectively and effi ciently. The Construction Sector the Offi ce for National Statistics and the UK Government’s Ludgate House, 245 Blackfriars Road, London, SE1 9UY Construction and Infrastructure Pipeline, which outlines future Residential T: 020 7921 5000 construction and infrastructure projects where public funding www.ubm.com is agreed. Barbour ABI also provides data for independent W: Infrastructure organisations, such as the Construction Products Association. Michael Dall Commercial & Retail Barbour ABI is part of global events-led marketing services and Michael is Barbour ABI’s Lead Economist specialising in communications company, UBM. construction and the built environment. He leads on Barbour ABI’s research and outputs on the construction sector assessing Hotel, Leisure & Sport Hinderton Point, Lloyd Drive, Cheshire Oaks, Cheshire, CH65 9HQ the trends and developments which impact upon it. Prior to T: 0151 353 3500 this Michael worked for GVA Grimley as a Principal Economist Industrial E: [email protected] focussing on the commercial property sector. Medical & Health W: www.barbour-abi.com To contact Michael either: @BarbourABI T: 020 7560 4141 Education E: [email protected] @MichaelGDall Chosen provider of Construction New Provider of the Government's Construction Orders estimates to the ONS and and Infrastructure Pipeline communal dwellings data Hinderton Point, Lloyd Drive, Cheshire Oaks, Cheshire, CH65 9HQ DOWNLOAD METHODOLOGY CLICK HERE T: 0151 353 3500 E: [email protected] @BarbourABI 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ECONOMIC CONTEXT Q2 FIGURES SHOW OUTPUT SEPTEMBER 2014 CONTINUES TO RISE To navigate just click on the tabs, buttons or page numbers and they will take you directly to your Other news this month on the UK economy includes: reasons or the extent to which this will endure. It is Barbour ABI’s Revised fi gures for UK GDP confi rmed chosen section. view that the near term outlook for the UK economy is good but ❚ The prospect of Scottish independence spooked the growth in Q2 was 0.8%, unchanged from the the addressing the productivity puzzle will be vital in ensuring markets with a large fall in the value of Sterling and falling initial estimate. sustainable economic growth. About Us share prices in Scottish fi nancial services companies The detailed results showed that the service sector and production ❚ There was a surprise fall in average prices of goods sold in 120 Economic Context sector expanded in the quarter, but that construction was fl at and July 2014, falling by 0.9% Q1 2008 Q2 1990 Q2 1979 115 agriculture declined by 0.2%. However, it is only the service sector The Construction Sector ❚ The pace of recovery in the service sector slowed according 110 which is back above its pre-recession peak (see Fig. 1.1). to the CBI Services sector survey 105 Residential Analysing the pace of recovery from this recession compared to The latest Bank of England Infl ation Report painted a broadly 100 previous recessions indicates the comparatively longer time it is positive picture of the UK economy. It highlighted the continuing 95 Infrastructure taking for the UK to recover than in the past. At the same point improvement in output and unemployment and noted that business 90 GDP as % of Pre-downturn Peak of GDP as % in the last recession in the early 1990s the economy was 15.7% investment levels are increasing. However, it also noted that 85 Commercial & Retail larger than at the start of the downturn, compared to just 0.2% at productivity and wage growth remain weak and it is unsure of the 80 present (see Fig. 1.2). 1234567891011121314151617181920212223242526 Quarters After GDP Peak Hotel, Leisure & Sport 105 Manufacturing The level of government debt as a percentage of GDP is still Production Fig. 1.2 UK GDP as Percentage of Pre-downturn Peak Source: ONS signifi cantly higher than pre-recession levels. Public Sector Construction Industrial 100 Net Debt now stands at 76.5% of GDP in July 2014 whereas in Services January 2008 it was 35.7% (see Fig. 1.3). 80% 76.5% Medical & Health 95 70% The latest forecasts from the Bank of England predict that GDP UK GDP 60% Education growth will maintain at 0.8% in Q3. The Bank is also confi dent that 90 50% there is signifi cant slack in the economy allowing it to grow without 40% 35.7% rapid infl ation. It maintains the view that business investment will 85 30% increase this year and there is some evidence of this in offi cial of GDP Percentage 80 20% statistics. If business investment does maintain its increase 12341234123412341234123412 10% the longer term outlook for UK economic performance will be 2008 2009 2010 2011 2012 2013 2014 Hinderton Point, Lloyd Drive, Quarter 0% Cheshire Oaks, Cheshire, substantially improved. Jan 2008 July 2014 CH65 9HQ Fig. 1.1 UK GDP Source: ONS Fig. 1.3 Government Debt Source: ONS T: 0151 353 3500 E: [email protected] @BarbourABI 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 THE CONSTRUCTION SECTOR CONTRACT VALUES SEPTEMBER 2014 INCREASE IN AUGUST To navigate just click on the tabs, buttons or page numbers and they will take you directly to your year ago. The levels of infrastructure contracts also fell signifi cantly. The latest fi gures from the ONS show that the construction sector in the UK was fl at between chosen section. This was partially offset by increases private industrial and private June and July 2014. commercial contracts. About Us Comparing output levels with July last year showed an increase of Output in the Private Commercial sector increased by 1% between 2.6%. It is evidence of the improving performance of the sector but June and July, but is 4.6% lower than July 2013. Infrastructure The CPA/Barbour ABI Index Economic Context notable that longer term growth is not as high as in previous months. increased by 3.3% between June and July but was 9.2% lower The CPA/Barbour ABI Index which measures the level of contracts than July 2013. This highlights that the growth patterns within the awarded using January 2010 as its base month recorded a reading It is clear that the housing sector is the main component of growth The Construction Sector industry are reliant on housing and broader improvements are of 129 for July (see Fig. 2.3). This is a slight increase from last within the industry (see Fig. 2.1). Private Housing increased needed to ensure a robust recovery. month and continues to support the view that overall activity in the by 1.1% between June and July 2014 and 15.9% from the Residential industry remains strong. The readings for Private Housing remained corresponding month in 2013. At the same time Public Housing, The ONS/Barbour ABI New Orders for Q2 2014 showed that total strong. However, the reading for Commercial Offi ces fell with a while down from June 2014 was 30.1% higher than last year. order levels increased by 3.8% between Q1 2014 and Q2 2014 Infrastructure reading of 122 this month but Commercial Retail increased and but were 5.3% lower than a year ago (see Fig. 2.2). There was a reported a fi gure of 160. Commercial & Retail % change surprise yearly fall in the levels of private housing compared to a July 2013 – June 2014 – July 2014 July 2014 120 Hotel, Leisure & Sport All New Housing 250 All New Build Total All Work 2.6 0.0 All Other Work Private Housing 100 All New Work 2.8 1.0 All New Work Commercial Offices Industrial 200 Commercial Retail Public Housing 30.1 -0.2 80 Private Housing 15.9 1.1 Medical & Health 150 Infrastructure -9.2 3.3 60 Public (ex Infrastructure) -5.8 0.1 Education 100 Number of New Orders 40 Private Industrial 20.3 -2.0 Awarded Contracts Private Commercial -4.6 1.0 20 50 Repair & Maintenance 2.2 -1.5 Public Housing 1.8 -0.3 0 41234123412341234123412341234123412 0 Private Housing 2.1 2.1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 OND J FMAMJ J ASOND J FMAMJ J A Hinderton Point, Lloyd Drive, Non-Housing 2.4 -4.1 Quarter 2012 2013 2014 Cheshire Oaks, Cheshire, CH65 9HQ Fig.