the u.k. construction industry an overview

The U.K. Construction Industry

AN OVERVIEW

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Industry and its structure

Some of the problems and how they are being addressedThe economic contextSolutions ??Problems solved

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

The Construction Industry UKSize

Approx. £ 113 billion pa. (8% UK GDP)Approx 25% public sector investment

Public sectorHighways, utilities, education, health, housing

Private sectorHousing, Offices, Industrial, retail

Private sector “provision”- public serviceHousing (RSL), Education, health, infrastructure (PPP)

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Construction 2010

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Current position 2010

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Political influence ?

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Spending trends

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

• The UK’s four main ambitions are to:

• create the most competitive tax system in the G20;

• make the UK the best place in Europe to start, finance and grow a business;

• encourage investment and exports as a route to a more balanced economy; and

• create a more educated workforce that is the most flexible in Europe.

• As set out in ‘The Plan for Growth’ published alongside the Budget 2011

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Headline Forecasts % change year on year, unless otherwise stated

Outturn Forecast

2009 2010 2011 2012 2013 2014 2015

UK GDP -4.9 1.3 1.7 2.5 2.9 2.9 2.8

Euro Area GDP -4.0 1.7 1.4 1.8 1.8 1.9 1.9

World GDP -0.7 5 4.2 4.3 4.3 4.4 4.4

PSc net borrowing 11.1 9.9 7.9 6.2 4.1 2.5 1.5

CPI 2.2 3.3 4.2 2.5 2.0 2.0 2.0

RPI -0.5 4.6 5.1 3.6 3.5 3.6 3.8

Unemployment (m) 1.53 1.5 1.54 1.53 1.43 1.31 1.18

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

% change year on year, unless otherwise stated

Outturn Forecast

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Consumer spending -1.9 5.1 5.2 4.2 4.6 4.6 4.6

Res property prices -2.9 5.5 -2.9 1.2 3.9 4.3 4.3

Res property transactions 14.2 -1.9 -1.0 20.2 20.4 1-.5 5.2

Comm property prices 5.9 4.7 2.1 3.9 5.6 5.2 4.2

Com property trans -17.5 11 4.5 3.1 5.1 5.3 5.2

Market interest rates 0.8 0.7 1.6 2.7 3.4 4 4.4

Euro/Sterling exc rate 1.13 1.18 1.16 1.16 1.16 1.16 1.15

Pubsec exp £ billion 600.9 632.8 656.7 669.6 682.4 694.6 713.4

Pubsec cap inv £ billion 68.9 61.6 53.7 50.7 47.7 49.1 50.4

Total Pubsec exp £ billion 669.7 694.4 710.4 720.2 730.1 743.6 763.8

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

What is the short-term future for Construction

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Industry structure• Categorised by small organisations employing up to

10 employees

• Typically trade based

• Is the industry concentrated?

– 100 largest firms same value of work as 137,000 smallest firms

– Top 42 firms responsible for 13% of output

– Possibly an argument that the industry is becoming more concentrated- main difficulty is measurement

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

SIC Categories

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

SIC Category F- Construction

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Number of firms

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Rise of the subcontractor• Traditionally (50 yrs ago) high % employed craftsmen• Now >80% work subcontracted to specialists• Specialists range from high-tech Mechanical and

Electrical to low-tech labour only bricklayers• Result

–Increase in transactions in industry

–Increase in fragmentation

–Disbursement of expertise

• Problems- need for committees and reports

Financial Management in Construction Contracting

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Trades and employees

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Problems and Reports

• Problems–Late and low-quality projects–Lack of skilled labour–Poor prediction of budgets–Cost overruns–Disputes–Communication…..

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Reports

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Egan outcomes

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

How have we done?Met targets ??

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.

Economic and Business Blockers…

© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.