The UK construction market has experienced a virtually unbroken period of growth for the last thirteen years. New-build construction work in 2007 was over 40 per cent higher in real terms than in 1994. The private housing market has experienced the most sustained growth over this period but 2007 saw the start of some retrenchment.
School building activity has provided a backbone to the industry since the start of the century with the Government commitment to rebuild or refurbish the country’s stock of schools.
Office building grew steadily in the latter half of the 1990s and accelerated again from 2005 with a new London office building boom.
2008 is expected to benefit from further construction growth. Some increase in public housing work will offset the reduction in private housing activity as the Government makes more money available for social housing.
Office building, particularly in London, is not expected to peak before late 2008. The pace of school building work continues to pick up and Olympics building works will start to get under way.
Over the last decade construction prices have risen by an average 6.4 per cent per annum, initially driven by a shortage of labour. Since 2004, this situation has been alleviated by the arrival of the Eastern Europeans. Over the last few years, inflation has been driven more by materials prices as commodities such as steel and other metals and, more recently, timber have risen sharply due to world demand.
The full fall-out from the late summer credit crunch is still to be seen. Business confidence has been hit, leading to lower investment intentions. Some speculative office building may well no longer occur and banks are taking a harder line on funding more apartment blocks in less likely locations. Building work in the pipeline is expected to see building activity in 2008 exceed that of 2007 but the private commercial sector may take a pause for breath.