The value of construction contracts awarded in 2015 reached £74bn, a year-on-year increase of 16%, according to the latest Economic and Construction Market Review from Barbour ABI.
The figures demonstrate continued growth in the construction industry, stepping up from the £64bn value of contracts awarded in 2014 and £62bn in 2013.
But although the total value of construction contracts increased significantly, the number of projects commissioned in 2015 actually decreased by 583 compared to 2014.
This represents a year-on-year decrease of 4.7% – suggesting that the improvement in the industry’s order book has disproportionately benefited firms working on larger contracts.
These two sets of figures mean that the average construction project value has increased by £1.1m to £6.2m for the year, representing an 18% year-on-year increase.
Barbour ABI attributes the increase in overall value to project value to the return of the “mega project” to construction.
Commenting on the figures, Michael Dall, lead economist at Barbour ABI, said: “The return of the ‘higher value project’ has certainly been one of the biggest focal points for construction in 2015.
“Confidence seems to have returned for many of the larger [clients] within the industry, who must have felt that the time was right in 2015 to start commissioning mega-projects that should provide a boost to the industry for years to come.”
Value and number of construction contracts 2013-15
Source: Barbour ABI
An example of the large-scale projects commissioned during in 2015 is the £1bn Thames Tideway Tunnel.
Barbour also highlights the fact that the infrastructure had a very successful year increasing its total contract value by 47% to £18.9bn.
A number of high-value wind farm commissions, including EON’s £1.3bn Rampion scheme planned for the Sussex coast and a £330m extension to the Walney wind farm off the coast of Cumbria, contributed to this increase.
Dall continued: “It’s also clear that the number of large offshore wind farm projects has had a major effect on the infrastructure sector and its success last year, boosting construction in general with a major increase in contract value.”
Regionally, every area of the UK saw an increase in the value of contracts awarded in 2015, with the east midlands showing the most dramatic rise of 43.8%.
The south east, London and north west also all had strong rises, increasing by 32.2%, 28.3% and 25.4% respectively. Scotland and the west midlands had the least growth, increasing by 2.6% and 1.7% respectively.
Although the report showed a large percentage of growth in contracts awarded, Dall cast doubt on the industry’s ability to deliver on these contracts.
He concluded: “The question remains as to whether the construction industry has the supply, principally skilled labour, to deliver on these contracts awarded in the timescales envisioned. Solving these supply-side problems will be critical for construction’s prospects in 2016 and beyond.”
