february 2016 - barbour abi · the latest gdp fi gures for the uk economy were released in the...
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Economic ContextMajor announcements and developments in the UK economy this month.
The Construction SectorThe main economic headlines in the construction industry this month.
Sectors in DetailA closer look at changes in the major sectors within the industry this month.
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FEBRUARY 2016
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About Us
2
There was continued growth in GDP in Q4 from Q3, but levels remained down on 2014 at 2.2%, compared to 2.9% last year.
The latest GDP fi gures for the UK economy were released in the
last month and they showed that the UK economy had grown by
0.5% in the fi nal quarter of 2015 (see Fig. 1.1). This was slightly
higher than the 0.4% rate of growth experienced in the third quarter
and meant that for the full year the economy grew by 2.2%, well
below the 2.9% recorded in 2014.
While the total level of output is now comfortably above its
pre-recession peak the pattern of growth within the economy is still
very much focussed towards the dominant service sector. The latest
fi gures show that the service sector is now 11.6% higher than its
pre-recession peak while construction is currently 4.2% below its
pre-recession peak and manufacturing is 6.4% below (see Fig. 1.2).
This indicates the scale of the challenge of rebalancing the economy
towards manufacturing and construction given the dominance of the
service sector.
Putting the UK’s economic recovery in the context of the other
G7 economies suggests that since 2008 the UK has had a middling
performance. While the USA and Canada have grown the most
since the start of 2008, the UK had more subdued growth from
2010 to 2013 but one of the fastest growing since then (see Fig. 1.3).
Other news this month on the UK economy includes:
❚ The IFS highlighted that slowing wage growth could endanger
the Chancellor’s target to eradicate the defi cit by 2020
❚ The latest Infl ation Report from the Bank of England forecast that
the infl ation level would remain below 1% for the whole of 2016
❚ The composite PMI index which measures activity across all
sectors rose to a six month high of 56.0
ECONOMIC CONTEXT
YEARLY GDP GROWTH SLOWS IN 2015
340
360
380
400
420
440
460
GDP (£ m
illion)
GDP
Gro
wth
(%)
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Year
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Fig. 1.1 UK GDP Source: ONS
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Q
1 20
08 =
100
, ind
ex
Canada France Germany Italy
Japan United Kingdom United States
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3
Quarter
80
85
90
95
100
105
110
115
Fig. 1.3 GDP Country Comparison Source: OECD
80
85
90
95
100
105
110
115
2011201020092008 2012 2013 2014 2015
Q1
2008
= 1
00, i
ndex
Total Production
Manufacturing
Construction
Services
4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Quarter
Fig. 1.2 UK GDP Source: ONS
Construction is currently 4.2% below its pre-recession peak“
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Economic Context
3
THE CONSTRUCTION SECTOR
SLOWER START TO THE YEAR FOR CONSTRUCTION CONTRACT VALUEA further slow down in output levels in Q4, but growth on the same period last year. Private housing and infrastructure are the bright lights for 2016.
The latest fi gures from the ONS show that the construction
sector decreased by 0.4% between September Q3 and Q4 2015.
Comparing output levels with Q4 last year showed an increase of
0.4% (see Fig. 2.1).
Private Housing returned to quarter on quarter growth, with output
levels up 4.5% on Q3 and also up 5.4% on the same quarter last
year. Public Housing had quarter on quarter growth of 1.6% but
more signifi cantly was down a considerable 21.8% on Q4 2014.
Infrastructure was down 3.9% on Q3 but remained up 20.7% up
on the same quarter last year. With some large projects headed
by HS2 and Thames Tideway Tunnel its hope that this sector will
provide a boost to output levels over next couple of years.
The CPA/Barbour ABI Index which measures the level of contracts
awarded using January 2010 as its base month recorded a
reading of 128 for October. This is a continued decrease from the
previous month. The readings for Private Housing remain high
at 235, although down from level of 265 the previous two month.
Commercial offi ces activity had a marked slowdown with a level of
only 87. With plenty of promised work in the pipeline it is hope that
the remainder of 2016 will see a pick up in activity.
CPA ForecastsThe Construction Products Association recently updated its
forecasts for 2016 and beyond and the industry is now predicted
to grow by 3.6% this year and 3.8% next year on the back of
continuing strength in the new build private residential sector and
increasing activity in the infrastructure sector (see Fig. 2.3).
Construction SectorAccording to Barbour ABI data on all contract activity, January
witnessed a decrease in construction activity levels with the value of
new contracts awarded at £5.3billion, based on a three month rolling
average (see Fig. 2.5). This is an 8.6% decrease from December
and a 3.7% decrease on the value recorded in January 2015. The
number of construction projects within the UK in January increased
by 26.1% on December, but were 18.3% lower than January 2015.
% change
Quarter 4 2014 –Quarter 4 2015
Quarter 3 2015 –Quarter 4 2015
Total All Work 0.4 -0.4
All New Work 2.8 0.2
Public Housing -21.8 1.6
Private Housing 5.4 4.5
Infrastructure 20.7 -3.9
Public (ex Infrastructure) -4.7 -1.1
Private Industrial 7.4 -6.2
Private Commercial -2.1 0.5
Repair & Maintenance -3.7 -1.4
Public Housing -4.1 -4.3
Private Housing 0.3 -2.9
Non-Housing -6.2 0.7
Fig. 2.1 Construction Activity by Sector (chained volume measure) Source: ONS
0
100
200
300
400
500
600
Con
tract
s Aw
arde
d In
dex
(Jan
201
0 =
100)
All New Build
Private Housing
Commercial OfficesCommercial Retail
Industrial Factories
M A M J J A S O N D J F M A M J J A S O N D J
2014 2015 2016
Fig. 2.2 Contracts Awarded Source: CPA/Barbour ABI
Output Growth
2013 117,859 1.6%
2014 126,685 7.5%
2015 (e) 131,609 3.9%
2016 (f) 136,357 3.6%
2017 (p) 142,013 4.1%
2018 (p) 147,950 4.2%
2019 (p) 153,937 4.0%
Fig. 2.3 Growth Forecasts Source: Construction Products Association
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The Construction Sector
654
Projects by RegionLondon received the highest proportion of construction contracts
by region, accounting for 24% of the UK total (see Fig. 2.4). In
London, the award of the 22 Bishopsgate contract to Brookfield
Multiplex at a value of £500 million was the largest project in
January by construction value.
The North West had the second highest portion of contract activity
by value in January accounting for 13% of the value awarded.
The contract to develop a new pharmaceutical HQ for GSK in
Ulverston, Cumbria was the highest value contract in the region in
January with an estimated construction cost of £350 million. Wales
followed closely with the next highest proportion of contracts by
value, also with 13% of contract value awarded in January.
The largest project awarded was the Wylfa Nuclear
Power Station in Anglesey which agreed contracts
valued at £450 million for the construction element.
Types of ProjectBoth residential and infrastructure sectors received the highest
proportion of contracts awarded by value in January with 23% of the
total value of projects awarded (see Fig. 2.6). Residential projects
such as the Streatham Hill development in South West London
valued at £60 million and the Britannia music site in Ilford, valued at
£50 million were the two largest projects awarded.
The Wylfa nuclear power station in Wales was the largest
infrastructure project awarded as well as the Port Clarence
biomass plant in Cleveland valued at £200 million. Commercial
& retail accounted for 19% of contract values
awarded with 22 Bishopsgate in the City of London
the largest project in January.
3% 3% 5%
24%
6%
13%9%
10%
9%
13%
5%
East Midlands East of England London
North East North West Scotland
South East South West Wales
West Midlands Yorkshire & Humber
Fig. 2.4 Locations of Contracts Awarded Source: Barbour ABI
9%
6%
3%
13%
13%
3%
5%5%
9%
24%10%
Fig. 2.6 Type of Projects Source: Barbour ABI
Residential Industrial Commercial & Retail
Hotel, Leisure & Sport Medical & Health
Education Infrastructure
23%
13%
19%8%
5%
9%
23%
Fig. 2.5 Construction Activity Trends Source: Barbour ABI
0
200
400
600
800
1,000
1,200
1,400
Num
ber of Contracts
Valu
e (£
milli
on)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Month
J F M A M J J A S O N D J F M A M J J A S O N D J
2014 2015 2016
THE CONSTRUCTION SECTOR SLOWER START TO THE YEAR FOR CONSTRUCTION CONTRACT VALUE
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The Construction Sector
5 6
Take a look at these construction projects in focus this month.
Click on one of the projects below to skip to that page.
PROJECTS IN FOCUS THIS MONTH
COMMERCIAL & RETAIL22-24 Bishopsgate – Office/Retail/Restaurant£500,000,000
A snippet of this month's regional activityTake a look at what regions have had the most activity.
Residential
Infrastructure
Commercial & Retail
Hotel, Leisure & Sport
Industrial
Medical & Health
Education
HOTEL, LEISURE & SPORTUnite The Union – Hotel, Offices & Conference Centre£35,000,000
EDUCATIONUniversity Of Edinburgh – Data Technology Institute (DTI Building) Phase 3£30,000,000
INDUSTRIALGsk Ulverston, North Lonsdale Road – Pharmaceutical Manufacturing Facility£350,000,000
MEDICAL & HEALTHHampshire Hospitals – Critical Treatment Hospital£150,000,000
INFRASTRUCTURETwickenham Station Redevelopment£38,000,000
RESIDENTIALUnite Student Accommodation – Edinburgh£38,000,000
THE CONSTRUCTION SECTOR SLOWER START TO THE YEAR FOR CONSTRUCTION CONTRACT VALUE
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