UK Construction - What Does the Future Hold?
Friday
Image via WikipediaFinally, there is some cheer for the beleaguered construction sector. Although the recession has left no industry untouched, the building industry was particularly hard hit. In the last quarter of 2008, output nosedived by 4.9% despite a prediction that it would drop only 1.1%, shedding thousands of construction jobs along the way.
The good news is that the economic outlook for the sector is at last showing signs of recovery, with an overall rise in the third quarter of this year.
Although the main driver of growth appears to be repair and maintenance activity, statistics show that government programmes initiated from April onwards are at last beginning to translate into results.
Still vulnerable
Economists caution, however, that the initiation of new projects remain subdued in the private sector. Despite the recent upturn, construction activity remains 9% down on figures from the same period in 2008. There is also the concern that the recent spike in repair and maintenance work may be temporary at best and could slow down due to increased budgetary pressure over the next 12 months. This will have a negative knock-on affect on the economy as a whole, so it is vital that the construction sector is supported until such a time is reached that the building industry - and the wider economy - recovers.
Government funds are drying up
Gordon Brown announced this week that the government is embarking on a massive cost-cutting exercise in a bid to halve the budget deficit. The project will attempt to save £12 billion over four years and this means that many low-priority programmes will be mothballed. Some experts argue that certain construction developments, such as housing, are too important to be shelved. With private sector funding still scarce, it is clear that creative financing strategies need to be found if more jobs in the UK are to be created.
Where there's a will, there's a way
One new major initiative, a £600m biomedical research centre, has received the green light after months of doubt. The sources of funding for this building are a mixture of government and charity backing; construction is now due to start in early 2011. The centre will be built in central London, despite some stakeholders arguing that it should be built outside of the capital to save on costs.
One new major initiative, a £600m biomedical research centre, has received the green light after months of doubt. The sources of funding for this building are a mixture of government and charity backing; construction is now due to start in early 2011. The centre will be built in central London, despite some stakeholders arguing that it should be built outside of the capital to save on costs.
"London has been a global centre for leading medical research for four centuries," said Sir Paul Nurse, the centre's chairman of scientific planning.
He describes the UK Centre for Medical Research and Innovation as "the most exciting project for UK biomedical research in the next 50 years".
Funding was drawn from four clients, the Cancer Research UK, the Medical Research Council, University College London and the Wellcome Trust. This is expected to create hundreds of new construction and engineering jobs.
New routes to finance required
Despite the success of this scheme, many other construction projects are likely to be held back, unless an alternative source of funding can be found. Private sector funding has regressed significantly while the government is just not able to provide. Many are wondering if there is an alternative.
Tom Foulkes, director general at the Institution of Civil Engineers, suggests that the chancellor should consider sustainable funding alternatives, such as a National Infrastructure Investment Bank.
"A National Infrastructure Investment Bank can offer a way of ensuring that adequate long-term funding is available - on a continuous basis and at an acceptable cost."
Authorities need to support construction's return to health
Foulkes argues that this is not about the government spending more money. It is about how the government can act as a facilitator and a supporter of the construction sector in such a way that it supports growth in a sustainable matter.
The powers that be need to begin a dialogue around such alternative options, if not for the good of the building industry, then for the good of the economy as a whole.
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