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What does 2014 have in store for UK construction?

What does 2014 have in store for UK construction?
People all over the UK will be gathering in homes, pubs and clubs tonight (December 31st) to wave a goodbye to 2013 and herald the dawn of a new year.

It is a time when many like to reflect on what they have achieved over the past 12 months and set themselves goals for the year ahead. People will make the promise that "this year will be my year" which is typically done away with in the space of a few months. For businesses it is a time to take stock and look at what can be achieved in 2014 and what lessons they can be learnt from 2013. The construction sector is no different.

The sector kicked off 2013 in a somewhat cautious fashion with many organisations unaware of how the year was going to pan out. The industry has suffered since the economic downturn of 2008 and has been counting the cost ever since, however 2013 provided some respite and some unexpected joy in places. As the year drew to close many experts were toasting a growing confidence among construction companies and there is hope that this can continue from January 1st.

December's report from the Office for National Statistics (ONS) has offered cause for optimism when construction companies restart in the new year. The ONS noted that output for the sector during October had grown by 2.2 per cent compared with September and grown 5.3 per cent against the same period 12 months previous. The government department stated that thanks to "buoyant construction new orders" for the third quarter of 2013, the industry is expected to grow further in 2014.

Dr Noble Francis, economics directors at the Construction Products Association, explained that part of the improved performance was down to the stable housing market: "Unsurprisingly, private housing has been the key driver of recent output growth. Demand in the housing market has been boosted by Help to Buy and, as a consequence, output in the sector rose 6.2 per cent in October compared with September and 16.9 per cent compared with a year earlier.

"In addition, output in the largest construction sector, private commercial, rose 0.8 per cent in October compared with September and grew 8.7 per cent compared with a year ago, driven primarily by major projects in London."

The Help to Buy has given first-time buyers that extra helping hand when it came to purchasing a home. The scheme, set up by the government, allows people to contribute just five per cent of the property price as a deposit. They will then be given a loan of up to 20 per cent of the overall cost of the house then a mortgage will cover up to 75 per cent to ensure that the home can be taken off the market.

It has made life much easier for people looking to purchase their first abode but has also sparked a boost in production for construction companies across the UK. These type of schemes have been creating work for firms. Dr Francis explained that it the Q3 report from the ONS was good news for organisations looking ahead into the new year.

He added: "Looking forward, the ONS also reported that new orders for construction in Q3 were broadly flat compared with Q2 but considerably higher than one year earlier, with double-digit annual growth in the private housing and commercial sectors, suggesting that the recent growth should also continue into 2014."

While the end of 2013 has been very encouraging for the UK's construction sector there has been a note of caution from a number of corners with KPMG noting that it will not be quite as smooth sailing as many have predicted. The firm's head of infrasture, building and construction, Richard Threlfall, explained that the first half of the year could be difficult as demand will pick up far quicker than many companies can handle.

In a sector which has been looking forward to the day when the orders start rolling in once again, Mr Threlfall believes that some organisations simply do not have the manpower to cover the orderbook. He explains that the construction sector has lost around 20 per cent of capacity over the last five years thanks to the economic downturn making the supply chain much weaker. Should the demand spike then it could be a daunting challenge for some organisations.

However, Mr Threlfall did offer some hope: "More capacity in the supply chain will be opening up every day, but it will be the second half of the year at the earliest before supply catches up with demand. Until then the power will remain with the supply chain. Tier 1 contractors will continue to feel the squeeze, particularly those who chased volume during the recession and were left with wafer-thin margins."

As the clock strike midnight this evening and people raise their glasses for getting through another year, many will be thinking towards the future. For the construction sector there is a lot more positivity than this time 12 months ago but it will take a lot of hard work to ensure that 2014 closes on a similar high note.

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Date: 31/12/2013 16:40:21

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