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Economic ContextMajor announcements and developments in the UK economy this month.
The Construction SectorThe main economic headlines in the construction industry this month.
Sectors in DetailA closer look at changes in the major sectors within the industry this month.
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MARCH 2017
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Michael DallMichael is Barbour ABI’s Lead Economist specialising in
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About Us
2
Revised GDP fi gures show the UK economy grew by 0.7% in Q4 2016.
The latest revised GDP fi gures were released in the last month and
they now show that the UK economy had grown by 0.7% in the
fi nal quarter of 2016, revised up 0.1 percentage points from the
preliminary estimate. Upward revisions (due to later data received)
within the manufacturing industries is the main reason. Growth in
2016 was 1.8% higher than that in 2015. This has been revised down
by 0.2 percentage points from the preliminary estimate (see Fig. 1.1).
Looking over the longer term the yearly fi gure of 1.8% GDP growth
is signifi cantly below the fi gure of 3.1% recorded in 2014 and is also
below the 2007 pre-recession growth rate of 2.6% (see Fig. 1.2).
UK GDP growth in Quarter 4 2016 saw a continuation of strong
consumer spending which is in line with the Retail Sales Index for
Quarter 4, which grew by 1.2% and strong growth in the output
of the services sector with a notable contribution in consumer-
focused industries. In Quarter 4 2016, there has been a slowdown
within business investment which fell by 1.0%, driven by subdued
growth within the “ICT equipment and other machinery and
equipment” assets.
Putting the UK’s economic growth in the context of the other
G7 economies, during Quarter 4 2016, the UK experienced the
strongest rate of growth among European groupings and G7
countries. In Quarter 4 2016, the UK experienced 0.2 percentage
points higher growth than the USA, who experienced a slowdown
in growth from 0.9% in Quarter 3 (July to Sept) 2016 to 0.5% in
Quarter 4 2016 (see Fig. 1.3).
Other news this month on the UK economy includes:
❚ The Chancellor delivered the fi rst of what will be two budgets in
2017 with a second to follow in the Autumn
❚ The unemployment rate in Q4 2016 was 4.8%, down from
5.1% for a year earlier. It has not been lower since July to
September 2005
❚ The Offi ce for Budget Responsibility expects the economy to
grow quicker in 2017 than previously forecast – 2% up from
1.4%, but then slower in 2018 (1.6 % down 0.1%) and 2019 (1.7%
down from 2.1%), before picking up to 2% in 2021.
ECONOMIC CONTEXT
UK LED ALL G7 COUNTRIES IN ECONOMIC GROWTH IN Q4 2016
340
360
380
400
420
440
460
480
GDP (£ million)
GDP
Grow
th (%
)
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Year2006 2007 2008 2009 2010 2011 2012 2013 2014 20162015
Fig. 1.1 UK GDP Source: ONS
2008 2009 2010 2011 2012 2013 2014 2015 2016GD
P Gr
owth
(Q1
2008
= 10
0)
Canada France Germany Italy
Japan United Kingdom United States
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
Quarter
80
85
90
95
100
105
110
115
Fig. 1.3 GDP Country Comparison Source: ONS
-5
-4
-3
-2
-1
0
1
2
3
4
5
GDP
Grow
th (%
)
20142013201220112010200920082007 2015 2016
Fig. 1.2 UK GDP Comparison over 10 years Source: ONS
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Economic Context
3
THE CONSTRUCTION SECTOR
CONSTRUCTION CONTRACT VALUES INCREASE IN FEBRUARYThe value of construction contracts increased in February but the number of projects saw a signifi cant decline.
The latest fi gures from the ONS show that in January 2017,
construction output fell by 0.4% compared with December 2016.
However, output grew on a 3 month on 3 month basis by 1.8% (see
Fig. 2.1). Repair and maintenance fell 1.3% month-on-month in
January, with decreases in public housing and non-housing repair and
maintenance. All new work showed signs of fl attening out with growth
of 0.1% in January 2017, but continued to grow in the latest 3 months
compared with the previous 3 months at a rate of 2.1%. Despite
falling month-on-year for the 13th consecutive month, infrastructure
grew month-on-month for the third time in a row, increasing 3.5%
in January 2017. Overall annual construction output growth has
increased for 2016, to 2.4% from 1.5%, due to upward revisions for all
4 quarters, including a revision of 0.8% in Quarter 4 (Oct to Dec) 2016,
from 0.2% to 1%. New orders fell by 2.8% in Quarter 4 of 2016, driven
mainly by falls in private industrial and private commercial work.
Despite new orders falling in Quarter 4 of 2016, the annual volume of
new orders is now at its highest level since 2008.
The CPA/Barbour ABI Index which measures the level of contracts
awarded using January 2010 as its base month recorded a reading
of 141 for February, rising by 4% when compared to January (see
Fig. 2.2). After falls in the second half of 2016, contract awards have
risen in the fi rst two months of 2017, with private housing, public health,
offi ces and leisure all increasing in February. Interestingly however,
London prime housing market new starts and prices are declining, but
if you exclude this small niche, they are both rising. UK house prices
rose 4.5% in the year to February according to Nationwide.
Other news this month in the construction sector:
❚ The Markit/CIPS PMI reported a fi gure of 52.5 for UK
construction in February, up from 52.2 in January, indicating
that construction activity expanded.
❚ In the budget the Chancellor announced £90m for the North
and £20m for the Midlands to help pinch points on the national
road network. He also announced that the Government will be
launching a £690m competition to tackle urban congestion.
❚ According to the latest CPA State of Trade Survey half of
construction product manufacturing fi rms reported that sales
rose during the fourth quarter of 2016, the fi fteenth quarter of
growth. However heavy and light side manufacturers have very
different forecasts for 2017, with 18% of heavy side product
manufacturers and 57% of light side manufacturers reporting
that they anticipate sales to rise over the coming year.
Construction SectorAccording to Barbour ABI data on all contract activity, February
witnessed an increase in construction activity levels with the value
of new contracts awarded at £6.4 billion, based on a three month
rolling average (see Fig. 2.4). This is a 6.8% increase from January
and a 15.4% increase on the value recorded in February 2016.
0
100
200
300
400
500
600
Cont
ract
s Awa
rded
Inde
x (Ja
n 20
10 =
100)
All New Build Private HousingCommercial Offices
Commercial RetailIndustrial Factories
A M J J A S O N D J F M A M J J A S O N D J F
2015 2016 2017
Fig. 2.2 Contracts Awarded Source: CPA/Barbour ABI
% change
Quarter 3 2016 –Quarter 4 2016
January 2016 –January 2017
Total All Work 1.8 2.0
All New Work 2.1 3.4
Public Housing 3.2 -1.2
Private Housing 3.0 7.4
Infrastructure 4.0 -0.7
Public (ex Infrastructure) 3.5 5.4
Private Industrial (ex Infra.) -7.3 -14.2
Private Commercial (ex Infra.) 0.5 5.2
Repairs & Maintenance 1.2 -0.7
Public Housing 1.4 -13.1
Private Housing 5.4 9.7
Non-Housing -2.0 -4.6
Fig. 2.1 Construction Activity by Sector (chained volume measure) Source: ONS
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The Construction Sector
4 5 6
However the number of construction projects within the UK in the
three months to February decreased by 19.6 % on January and
were 9.7% lower than February 2016.
Projects by RegionThe majority of the contracts awarded in February by value were in
the South East, accounting for 18% of the UK total (see Fig. 2.3).
In the South East, the award of the Terminal 2 project at the Port
of Dover to VolkerStevin, at a value of £400 million was the largest
project in February by construction value. Terminal 2 will consist of
four large ferry berths, new pier structures, new marina, reclamation
and infrastructure works.
London had the second highest portion of contract activity
by value in February, accounting for 15% of the value
awarded. The largest contract was for the Angel House,
Marsh Wall redevelopment in Poplar. This scheme
will construct 336 flats in a 48 storey tower at a value
of £150 million and was awarded to Balfour Beatty.
East of England was the region with the next highest
proportion of contracts by value, also with 15% of contract value
awarded in February. The largest project awarded was the 45MW
integrated waste management facility at Rivenhall Airfield at a value
of £679 million, awarded to Hitachi Zosen Inova UK.
Types of ProjectInfrastructure had the highest proportion of contracts awarded by
value in February with 37% of the total value of projects awarded
(see Fig. 2.5). Alongside the Rivenhall Airfield development and the
Port of Dover scheme projects such as the Trafford Park Metrolink
extension valued at £350 million and installation of a new cable link
in the Channel Tunnel valued at £185 million were
two of the larger projects awarded.
After the Infrastructure sector, the next largest in
February was Residential, which accounted for a much
smaller 23% of contract value. The Furness Quay
development in Salford to build 707 flats valued
at £53 million and the Hengrove Park site in Bristol
to deliver 260 units valued at
£50 million were two of the
larger projects awarded.4% 10%
15%
15%
2%14%
8%
18%
5%2%
7%
East Midlands East of England London
North East North West Scotland
South East South West Wales
West Midlands Yorkshire & Humber
Fig. 2.3 Locations of Contracts Awarded Source: Barbour ABI
8%
2%
4%
14%
2%
10%
7%15%
5%
15%18%
Fig. 2.5 Type of Projects Source: Barbour ABI
Residential Industrial Commercial & Retail
Hotel, Leisure & Sport Medical & Health
Education Infrastructure
23%
7%
13%
12%1%7%
37%
Fig. 2.4 Construction Activity Trends Source: Barbour ABI
0
200
400
600
800
1,000
1,200
1,400
Number of Contracts
Value
(£ m
illion
)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Month
F M A M J J A S O N D J F M A M J J A S O N D J F
2015 2016 2017
THE CONSTRUCTION SECTOR CONSTRUCTION CONTRACT VALUES INCREASE IN FEBRUARY
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The Construction Sector
4 5 6
Take a look at these construction projects in focus this month.
Click on one of the projects below to skip to that page.
PROJECTS IN FOCUS THIS MONTH
COMMERCIAL & RETAIL100 Liverpool Street – Office Extension/Refurbishment£120,000,000
A snippet of this month's regional activityTake a look at what regions have had the most activity.
Residential
Infrastructure
Commercial & Retail
Hotel, Leisure & Sport
Industrial
Medical & Health
Education
HOTEL, LEISURE & SPORTTynecastle Stadium – Main Stand & Nursery£12,000,000
EDUCATIONBarry Building Redevelopment – Royal College of Surgeons of England£25,000,000
INDUSTRIALPrologis Park, Fradley – DC1 Warehouse and Distribution Unit£50,000,000
MEDICAL & HEALTHDurham Diagnostics and Treatment Centre£4,500,000
INFRASTRUCTUREWaverly Modifications – Platform 5, 6 and 12£23,000,000
RESIDENTIAL225 Marsh Wall Redevelopment – The Madison£150,000,000
THE CONSTRUCTION SECTOR CONSTRUCTION CONTRACT VALUES INCREASE IN FEBRUARY
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The Construction Sector
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