Overall there has been a decline in
global economic growth compared to a year ago, a PwC survey has found, which isn’t surprising given the fall in oil
prices, the instability in the European Union, fiscal deficits in a number of
countries and also the current Ukraine situation. This is on a global basis but
when construction CEOs were asked about their own business it was clear they
saw growth with key drivers being good visibility of pipeline and order book
and a clearing down of the backlog. A lot of businesses are also seeking to
expand into emerging countries and take advantage of increased infrastructure
spend.
So let’s have a think about what is
driving economic growth – well it comes down to emerging economic growth,
demographic changes and increasing urbanisation. All of these are underpinning
growth with 41% of CEOs expecting to enter new sectors to seek better margins
and reduce or spread the risk.
What is interesting to see is how the
industry is making use of partnerships, technology and diversity to grow their
business.
Technology
BIM is a key development which will have
significant implications for the industry particularly construction costs and
waste; but will also facilitate monitoring the whole life operating costs and
performance of projects. This advancement although in early stages of actually
being used will have far reaching changes to how businesses approach projects. The
use of technology will also provide for increased data on construction projects
and operating costs and undoubtedly present significant opportunities for the
owners of that data. And let’s not forget the advancement of the 3D printer
advancing the industry. This does still leave the challenges of cost, being
more efficient and making use of these advancements and the overall skills
required in the sector.
Partnerships
Moving away from your normal trade or
geographical area can increase the risk to a business but what many are doing
is spreading the risk by partnering – this is facilitating expanding into new
markets, cutting costs and sharing the risk. The new markets are bringing new
customers and the sharing is allowing for larger projects to be bid for. One
area you see this more and more is bids for government contracts – showcasing
a number of partners tends to bring a
mixture of skills.
Diversity
The industry is waking up and moving
forward and it no longer feels solely like a “men’s club”. This promotion of
diversity and inclusiveness is helping the industry in a time of skills
shortages particularly engineers and other skilled trades. Its early days but
I’m starting to notice more women in the industry and actually hearing about
new ideas as a result.
So do I think in a years’ time all will
be well, of course not as the above three items are long term investment.
However the sheer recognition that these can support growth is all the industry
needs to move in the right direction.
There is only one week until the Election
Day so here are a few final thoughts on the topic:
Conservatives – Very strong
promotion of a Northern Powerhouse and the recent budget took steps to make
that clear. The idea of HS3 is okay, actually starting it will be the key –
doing is better than saying. My concern is that private renters will lose out
and poor performing housing associations will win under Right-to-Buy
effectively reducing the housing stock for those who can’t afford even the
reduced prices. Now the argument will be that the sales fund future
developments, I guess I’m just a cynic that actions again speak louder than
words – how many affordable homes are built a year again….Recently the
Institute of Fiscal Studies warned that this scheme risks dividing communities
into rich and poor, has uncertainties around actual revenues it can raise and
doesn’t appear to be winning over the public. The Brownfield Regeneration Fund should
though help specialised developers bring forward some fairly innovative schemes
on previous poor land.
Labour – The party for the
SME house builder, the saviour of the industry if only they could get finance,
well fear not Uncle Ed is coming to your rescue however the mansion tax is
silly, just silly. Yes they can afford it but we want to retain this people in
the UK not have them move residency to other European cities. My key concern to
Labour is “Use it or lose it” feels too iron fist at the moment but initiatives
to help increase smaller sites available to SMEs makes me smile. The other
issues is the lack of clarity around some key points – like how will you build
200,000 homes and how are you actually going to funnel Help-to-Buy ISAs into
your Future Homes Fund – potentially crowd pleasers with no detail. Think we
may be worse off.
Liberal Democrats – Sounds lovely
doesn’t it – developments focussing on walking, cycling and public transport.
Sounds very lovely if it wasn’t a pipe dream as for starters you need to sort
out public transport! And the Mansion tax crops up again (call it what you want
it’s just the same!). The stand out is 300,000 homes per year and a housing
investment bank. I am however doubtful of being able to deliver without more
details and the idea of garden cities, well as a Northern is unknown because it
just feeds the south.
Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to
property and construction.
Enjoy
the weekend
Lee
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