construction industry forecasts Dr F. Noble Francis economics director

current & near-term economic situation

Economic Growth? GDP + 0.5% Manufacturing - 0.3% 3 rd 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 the construction industry

Private Housing Government attempting to boost housing supply Housing Strategy? Key issue still Affordability Don’t believe the hype – planning and localism construction industry forecasts ,000 Starts (2007) 73,000 Starts (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 industry forecasts ,000 Starts (2010) 26,500 Starts (2011) 19,100 Starts (2013)

Total Housing Overall, 121,500 this year ,000 over 5 years 267,000 new households p.a. 1.3m households in 5 years construction industry forecasts Additional Housing Gap ( ) 671,000

Education inc. PFI Capital expenditure: £7.3bn in 2010/11 £3.3bn in 2013/14 Focus - finishing BSF and Academies plus basic maintenance

Health inc. PFI Capital Expenditure: £4.5bn in 2010/11 £4.4bn in 2013/14 However: Focus - essential repairs Shift towards I.T. spending

Offices Output fell 48% between ( ) Demand high profile space and refit in GL Surfeit office space outside GL

Retail – 26% fall Expansion plans by major supermarkets and international investment Negative LT Trend from internet sales

Industrial Factories – 40% fall Growth due to manufacturing and exports Not driving growth as much as Government anticipated

Industrial Warehouses – 56% fall in output Recovery from low base due to: Domestic demand Long term boost - trend to internet shopping

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

Rail Network Rail fixed spend but post-2014? Crossrail outside of this - £14.5bn to finish in 2018 NAO – £1bn efficiency savings

Energy Nuclear programme Near term work - decommissioning & prelims at Hinkley Renewables, wind farms, offshore connections

Private Housing RM&I Slow economy and VAT - contraction in – deferred consumer spending but CERT offset 2013 onwards – Economy driven growth Green Deal ???

Public Housing RM&I Driven by Decent Homes programme £2 billion from CSR (optimistic!!!) Programme to finish after this spending

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 ( ) Private Public inc PFI

Contribution to Growth

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