CM's round-up of construction forecasts and predictions for 2014
1. Business activity
UK construction companies remain positive about growth at the end of 2013 thanks to relatively sharp rises in output, new orders and employment, according to the latest Markit/CIPS UK Construction PMI survey conducted in December. The respondents also anticipate an increase in business activity in 2014, with the proportion of firms forecasting growth at 57%, compared to 10% expecting a decline. At 62.1 in December, from 62.6 in the previous month, the index was above the 50.0 value that separates expansion from contraction, and marks eight months of continuous output growth in the UK construction sector.
"The improving UK economic outlook is helping boost private sector spending patterns, meaning that the construction recovery has started to broaden out from housing demand and infrastructure projects to include strong growth in commercial building work."
Tim Moore, Markit
Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “The latest survey highlights that construction companies enter 2014 with the wind in their sails. Most encouragingly, the improving UK economic outlook is helping boost private sector spending patterns, meaning that the construction recovery has started to broaden out from housing demand and infrastructure projects to include strong growth in commercial building work.
“Over half of all survey respondents anticipate increased output levels during the course of 2014, which is up sharply from one-in-three construction firms that expected growth at the same time one year ago.
2. Project starts
Intelligence provider Glenigan forecasts a 4% increase in project starts for 2014, as private sector investment leads a sustained recovery in industry activity. Its Construction Prospects for 2014 report, prepared by Glenigan’s economics team, indicates that the value of projects receiving detailed planning approval improved strongly in 2013 and a firm development pipeline of future projects is now in place.
"Looking ahead to 2014, we anticipate an acceleration in construction growth, with project starts expected to increase by 4%."
Allan Wilén, Glenigan
Underlying project starts in the UK are expected to have risen by 2.5% in 2013 due to increases in the value of civil engineering projects and an uplift in private housing. Work volumes will continue to pick up across the industry as the increase in project starts feeds into output figures.
Commenting on the outlook, Allan Wilén, economics director at Glenigan, said: “Looking ahead to 2014, we anticipate an acceleration in construction growth, with project starts expected to increase by 4%. The private sector will be the key driver of demand in 2014 and Glenigan expects strong growth in the value of industrial, office, retail and hotel and leisure projects being brought to site.”
He added: “New project starts in these sectors contracted during the first half 2013 as economic confidence faltered; however, data for the second half of the year shows a rapid growth in starts that is expected to continue through 2014.”
3. European growth
The EuroConstruct Review of output forecasts for 15 countries across Western Europe puts UK construction growth at 2.4% and 3.1% in 2014 and 2015. The UK figures are calculated by Experian, and follow a 1.1% contraction in 2013. However, Experian's UK figures could be revised slightly upwards, following better-than-expected ONS data for Q2 and Q3, says Construction News.
In comparison, the forecast Western European average is a rather palid 0.9% and 1.7% growth in 2014 and 2015. Those average results include a strong forecast recovery in Ireland (9.8 and 8.2%), good propspects in Norway (3.6 and 3.7%) and continued pain in Spain (-6.7 and 0.5%)
The EuroConstruct research highlights how the construction output slump has been a Europe-wide phenomenon: comparing the volume of construction output in 2007 with the forecast volume at the end of 2013, it says there has been a decline of more than 26% (in constant prices).
According to Construction News, EuroConstruct also forecasts that the UK's share of overall European construction output is set to rise. Worth 12.9% in 2010, this is likely to reach 13.4% by 2015.
4. Flagship building completions
Significant buildings due to complete in 2014 include two major schemes by Rogers, Stirk & Harbour: the Cheesegrater, aka the Leadenhall Building (Laing O'Rourke), and the World Conservation and Exhibitions Centre at the British Museum (Mace).
Other highlights mentioned by the architecture weekly Building Design include O’Donnell and Tuomey’s LSE Student Centre, the candle-lit Sam Wanamaker Playhouse at the Globe Theatre in London, the reopening of the Everyman Theatre in Liverpool and the extension to the Whitworth Gallery in Manchester.
And in the year when Scots will be voting on whether or not they will be staying in the United Kingdom, the Bannockburn Visitor Centre by Reich & Hall could find itself visited by multiple TV crews seeking an emotive backdrop to the debate.
Employment growth across the economy seems set to continue in 2014, says the Chartered Institute of Personnel and Development. But it also highlights that 2013 was the fifth calendar year in a row when average earnings fell in real terms – this is unprecedented in at least the last 70 years. And if wages are to rise faster than prices on a sustainable basis, employers and policy makers need to tackle the causes of the UK’s poor productivity performance.
"Skills shortages in certain sectors may inflate wages for some, but if we are to create any realistic prospect of wages rising in real terms across the board, we need to improve productivity."
Mark Beatson, CIPD
Mark Beatson, CIPD chief economist, said: “A lot of attention is being given to falling real wages and the UK’s ‘cost of living crisis’, for understandable reasons. But not enough attention is given to the main reason why this has happened – that productivity has fallen since 2008. Skills shortages in certain sectors may inflate wages for some, but if we are to create any realistic prospect of wages rising in real terms across the board, we need to improve productivity. Central to this is business and government acting together to improve the way people are managed, with more emphasis on working smarter and creating value.
“While 2012 and 2013 were years when employment exceeded expectations, if both UK competitiveness and real wages are to increase then 2014 needs to be a year in which productivity exceeds expectations.”
Meanwhile, an emigration consultancy is predicting an exodus of British construction professionals to New Zealand, which is enjoying its biggest construction boom in 40 years. The country’s National Construction Pipeline recently reported a 10% per annum growth in New Zealand for four years, leading to an unprecedented level of building and construction work. The main driver is Auckland, which is set to undergo a 150% increase in housing demand over the next five years.
"New Zealand's economy is on the up and there has never been a better time for qualified professionals to live and work overseas."
Paul Arthur, The Emigration Group
Paul Arthur, managing director at Chester-based The Emigration Group, said: “New Zealand is on the brink of a property and construction boom, with a predicted 150% rise in housing demand in the next five years in some cities. This will fuel migration from the UK as New Zealand seeks to fill skills shortages with British workers.”
“New Zealand’s economy is on the up and there has never been a better time for qualified professionals to live and work overseas. The recent boom in construction will provide great opportunities for both newly trained and experienced construction professionals. The salary and lifestyle in New Zealand is unique and is one of the most desirable places to live in the world.”
7. The mobile office
In 2014, more of the sector’s knowledge workers will be found working in the “coffice” - a coffee shop, hotel lobby or airport lounge where the background noise provides a buzz but there are no colleagues to cause a distraction. The prediction comes from BT’s professional “soonologist” Dr Nicola Millard, who tells The Guardian that work is now a state of mind, rather than a place.
“There is no reason why knowledge workers shouldn’t all be working flexibly in five years,” she says. “My four criteria for working are that I need good coffee, I need good cake, I need great connectivity... and I need company. But I don’t necessarily work in the office if I want to concentrate. I will go to the office if I want to socialise about work.” (CM would like to endorse the bit about cake.)
8. Augmented reality
Futurologists have also been talking to londonlovesbusiness.com but here the thinking is bit bolder. If real-world construction ever loses its appeal, you may find there are career options opening up in augmented reality construction. The goal is to take computer-generated environments and superimpose them onto the real world, such as creating impossible buildings.
Futurologist Dr Ian Pearson told the website: “You might look at a completely plain office block and see a spectacularly interesting building in augmented reality. It’s going to be a source of a whole new kind of work. If you look at how many web designers were created by the web, then you will see more than that number being created by augmented reality in terms of digital architecture and avatar design and populating the virtual streets with interesting stuff.”