Construction industry forecasts 2011-2015 Dr F. Noble Francis economics director.

construction industryforecasts 2011-2015Dr F. Noble Franciseconomics director

current & near-termeconomic situation

Economic Growth?

• GDP + 0.5%

• Manufacturing - 0.3% 3rd consecutive fall

• Largest fall in RHDI since 1977

the new economic reality– forecasting the future

Prices and Rates

• Interest rates to stay low near term

• Inflation – above 5% in

September

• Increase in QE*

* Revised in October

the new economic reality– forecasting the future

Key Risks

• Government debt default from Greece/Portugal

• China economic slowdown affecting global economy

Looking forward in theconstruction industry

Private Housing

• Government attempting to boost housing supply

• Housing Strategy?

• Key issue still Affordability

• Don’t believe the hype – planning and localism

construction industryforecasts 2011-2015186,00

0Starts

(2007)

73,000Starts

(2009)

137,500

Starts

(2015)

Public Housing

• Up to 170,000 affordable homes in four years but...

• ...only half social housing

• DCLG capital expenditure £6.4bn in 2010/11 to £1.8bn in 2013/14

construction industryforecasts 2011-2015

30,000Starts

(2010)

26,500Starts

(2011)

19,100Starts

(2013)

Total Housing

• Overall, 121,500 this year...

• 663,000 over 5 years

• 267,000 new households p.a.

• 1.3m households in 5 years

construction industryforecasts 2011-2015

Additional Housing

Gap

(2011-15)

671,000

-5.5%

2.5%4.0%

20.3%

-7.2%

-16.5%

-19.3%-6.2%

2.1%

-100

-80

-60

-40

-20

0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Education inc. PFI

• Capital expenditure: £7.3bn in 2010/11 £3.3bn in 2013/14

• Focus - finishing BSF and Academies plus basic maintenance

6.3%

47.4%

-14.8%-0.9%

-29.7%

-15.2%-6.6% -2.0%

2.0%

-100

-80

-60

-40

-20

0

0

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Health inc. PFI

• Capital Expenditure: £4.5bn in 2010/11 £4.4bn in 2013/14

However:• Focus - essential

repairs• Shift towards I.T.

spending

20.4%

-3.7%

-36.3%

-15.5% -2.0%

5.0%

14.0%

8.0%5.0%

-100

-80

-60

-40

-20

0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Offices

• Output fell 48% between (2008-10)

• Demand high profile space and refit in GL

• Surfeit office space outside GL

4.7%

-3.3%

-23.0%

0.6%3.0%

3.0%5.0%

5.5%

5.0%

-100

-80

-60

-40

-20

0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Retail

• 2008-09 – 26% fall

• Expansion plans by major supermarkets and international investment

• Negative LT Trend from internet sales

-1.3%-14.1%

-29.1%

13.0%

-10.0%

3.5%6.0%

5.5%4.5%

-100

-80

-60

-40

-20

0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Industrial Factories

• 2007-09 – 40% fall

• Growth due to manufacturing and exports

• Not driving growth as much as Government anticipated

-1.3%

-34.2%

-31.9%

19.0%4.0%

7.0%

6.5%5.0%

4.5%

-100

-80

-60

-40

-20

0

0

500

1,000

1,500

2,000

2,500

3,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Industrial Warehouses

• 2008-09 – 56% fall in output

Recovery from low base due to:

• Domestic demand

• Long term boost - trend to internet shopping

-6.2%

11.6%

29.2%

22.3%

-6.0%

-20.0%

-22.0%

5.0%4.0%

-100

-80

-60

-40

-20

0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Roads

• Highways Agency capital investment to fall 44% by in by 2013/14

• Only 14 major schemes to start before by end of 2014/15

8.5%

7.9%

40.7%

32.9%

15.5%

20.0%

16.5%

10.0% 0.0%

-100

-80

-60

-40

-20

0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Rail

• Network Rail fixed spend but post-2014?

• Crossrail outside of this - £14.5bn to finish in 2018

• NAO – £1bn efficiency savings

7.0%

-0.2% -4.2%

20.1%

17.5%

15.5%

20.5%

32.0%

35.0%

-100

-80

-60

-40

-20

0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Energy

• Nuclear programme

• Near term work -decommissioning & prelims at Hinkley

• Renewables, wind farms, offshore connections

-2.6%

1.1%

-12.5%

6.1%

-1.0%

0.5%3.0%

6.0%

6.5%

-100

-80

-60

-40

-20

0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Private Housing RM&I

• Slow economy and VAT - contraction in 2011

• 2012 – deferred consumer spending but CERT offset

• 2013 onwards –Economy driven growth

• Green Deal ???

-5.4%

3.1%

-2.7%

6.8%

-7.0%-4.5%

1.0%3.5%

4.5%

-100

-80

-60

-40

-20

0

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Public Housing RM&I

• Driven by Decent Homes programme

• £2 billion from CSR (optimistic!!!)

• Programme to finish after this spending

2.1%-2.7%

-13.4%

8.2%

-1.1%-3.6% 0.0%

3.7%

4.7%

-100

-80

-60

-40

-20

0

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2007 2008 2009 2010 2011 (e) 2012 (f) 2013 (f) 2014 (p) 2015 (p)

£ M

illio

n

Summary

• Contraction in 2011 & 2012

• Flat in 2013

• Return to growth only in 2014

Risks to Construction

• Pace of economic recovery

• Impact of government policies

•Growth strategy• Localism• Green Deal• Energy

• Availability of finance

• Effect of increasing material/product costs

Construction Output (2010-15)

Private Public inc PFI

38%

62%

36%

64%

33%

67%

30%

70%

29%

71%

Contribution to Growth

£12.8 £4.3 £13.3 £23.4 £3.8 £12.0 £23.7 £11.2 £104.5£0

£20

£40

£60

£80

£100

£120

-8

-6

-4

-2

0

2

4

Private Housing Public Housing Public Non-housing

Commercial Industrial Infrastructure Private R&M Public R&M Total

Cha

nge

2011

-15

(£ b

illio

n)

Sector Value in 2010 (£ Billion)

For further information contact:

www.constructionproducts.org.uk

[email protected]