© Experian Limited 2012. All rights reserved. Experian and the marks used herein are service marks...

© Experian Limited 2012. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Limited. Other product and company names mentioned herein may be the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian Limited.

A prognosis for construction: 2012-2016

James Hastings, Head of Construction Futures

© Experian Limited 2012. All rights reserved.Confidential and Proprietary 2

Where have we been…

Construction has underperformed GDP in recent years, except in 2010!

2010 boosted by very strong growth in public sectors – the last hurrah before cuts begin to bite


…where are we now…

Output up by 2.4% overall

Private housing and infrastructure most buoyant, but former growing from a still low base

Start of decline in publicly funded activity


…and where are we going to

Even with growth of 30% in the five years to 2016, private housing output will still be 14% below its 2006 peak in real terms.

Thus most impressive growth is in infrastructure, which is already at a historic high


How are we getting there? – the macro environment...

Source: Experian


...key risks...

Sovereign debt crisis returns

Efforts to restore government and consumer finances constrains growth

Loosening monetary policy fails to stimulate economic activity

Savings ratio rises further as households become more defensive

Inflation reversal undermined by gains in oil and other commodity prices

Job shedding is worse than expected


...slowly!

Strong growth in activity between 2000-2007

2007 peak nearly 14% above 1989 peak in real terms

Depth of recession means that output still 2% below 2007 peak in 2016 on current forecasts


Public housing will not be driving growth

Sharp downturn kicks in this year

2011-15 AHP funding only £4.4bn compared with £8.4bn for 2008-11 period

Social housing providers expected to source financing from other sources


Demand/supply mismatch continue to grow

After a decade of variable growth, private housing activity shot up on the early 2000s

However it fell very sharply during the recession and on current projections will still be 14% below its 2006 peak in 2016


Boom time continues for Infrastructure work

Output already at new historic high but predicted to grow by further 20% to 2016

Crossrail activity not due to peak until 2013/14

By the time it starts declining new nuclear build should be off the mark


Public works moves in the opposite direction

Sector dominated by education work in recent years – 2011 share 57%

BSF ‘legacy’ projects has kept activity up but these are now beginning to complete

Output back down to around 2002 level by 2014


The demise of industrial construction?

Over past three years levels of industrial construction have been at their lowest since the data series began in 1955 in real terms

Growth very moderate over the forecast period and what there is driven by warehouses


Unexciting times for commercial construction

Output in 2011 only 76% of 2008 peak

On our current forecasts will still be 15% below 2008 peak in 2016

Most of the growth in the sector in the offices market


Wither the retrofit market?

Overall housing RM&I market has been on a downward path since the mid-2000s

Bulk of Decent Homes programme completed by April 2010

Little sign of retrofit agenda having a significant impact on growth as yet


Wither the retrofit market...again?

Expenditure cuts likely to have negative effect on public R&M levels

Private players cut back on routine and cyclical maintenance during recession

However sooner or later routine maintenance becomes essential work


Construction likely to underperform over the next five years compared with pre-recessionary period


The north/south divide returns to construction...


...because...

Public services tend to take a larger share of the economic cake in the northern English regions, thus cuts affect them disproportionally

Regions which benefitted strongly from the early stages of the BSF programme will see public non-residential output fall further

Major infrastructure projects are tending to be ‘greater’ south-east centric

Growth in the commercial sector is likely to be stronger in the greater south-east than elsewhere in England


Conclusion

Economic growth below trend

Infrastructure the star of the show

Jury is out on retrofitting boost to industry

Public/private divide in future performance

Significant north/south divide

© Experian Limited 2012. All rights reserved. Experian and the marks used herein are service marks...

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