As 2014 draws to a close there are still plenty of reasons to be optimistic about the performance of the construction industry
Heading into 2015, the pipeline of work remains strong and is indicative of continued growth.
While the latest Office for National Statistics output figures showed a monthly fall in construction activity between September and October the revised figures from earlier statistical releases show that so far in 2014 the industry has grown by 6.2%.
Residential remains the main contributor to this growth. In the new public and private housing sectors output in 2014 is 23.7% higher than in the same period in 2013. By way of comparison, the private commercial sector has increased only slightly in the same period by 1%. It is worth noting, however, that the value of new orders in the commercial sector is 18.3% higher in the first three quarters of 2014 compared with 2013.
Economic theory suggests that as business investment continues to increase the commercial sector should benefit with increased activity in offices and retail contracts in particular. That has certainly been the case in the past and if the latest figures are accurate I would highlight the commercial sector as the one to watch next year in the industry as it has the potential to be a real game changer in terms of the industry鈥檚 overall performance.
Most analysts continue to be puzzled by the infrastructure sector. A 拢1bn road improvement scheme proposal was announced with much fanfare at the start of the month, but the latest figures show that the sector has actually declined in 2014. Comparing the January to October period in 2013 with the same period this year, output in the sector is 5.3% lower. New orders for infrastructure projects do not provide much comfort as the value of orders in the first three quarters are 21% lower compared to same period last year.
Infrastructure aside residential will continue to support growth into 2015 as the housing debate is likely to be a key battleground in the upcoming elections. All mainstream political parties are committed to continuing the measures to boost the new build market, which should ensure continued growth in this sector. This, coupled with commercial growth, should augur well for the industry next year.
Michael Dall is an economist at Barbour ABI
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