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  • 7/27/2019 Building Britains Future

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    CBI ondt tteg

    Bdg Bt teAn industrial strategy

    for construction

    The CBIs submission to theconstruction industrial strategy

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    An industrial strategy for construction developedby the sector and government has the potentialto unleash growth in the industry and drivetransformation. It will help secure the businessenvironment that enables construction to thriveby creating long-term operational certainty.

    The CBIs 2012 report Playing our strongest hand Maximising

    the UKs industrial opportunities set out the case for developing

    industrial strategies in key growth sectors to rebalance the

    economy towards investment and trade. The construction sector

    is a key economic enabler creating and maintaining our built

    environment. The sector has strong potential for growth because

    of its job-creation capacity, extensive value chain and latent

    capacity as a result of the recession.

    As part of a suite of industrial strategies, the government will

    launch the construction industrial strategy in summer 2013.

    This should be the start of an evolving process of industry and

    government working in partnership to deliver the strategy.This paper sets out the CBIs views on an industrial strategy

    for construction and is based on extensive discussions with

    the construction sector and the wider business community.

    In the future the construction sector will be an enabler of

    other industries, providing services that exceed expectations

    by leveraging world-leading expertise. A strong domestic

    manufacturing sector will be at the heart of an innovative

    and responsive sector.

    A shared vision for the future of the sector will need to be at

    the centre of a successful industrial strategy for construction.

    A strategy that delivers bold targeted action will ensure:

    The construction sector is at the heart of the UKseconomic growth

    Construction is an economic engine that meets and

    stokes demand from key sectors

    By harnessing sources of competitive advantage,

    construction will be a world-leading industry by 2025.

    Establishing a shared vision for construction in 2025

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    The construction sector is a key job creator and contributor to theUK economy, employing over 2 million people.1 It is a diversesector ranging from international companies to thousands of smallbusinesses offering services such as contracting, house building,consultancy and professional services, and includes manufacturersof construction products. The supply chain alone was worth124.6bn in 2010.2

    Overall, construction accounted for 6.7% of GDPin 2012.3 But the effects of construction

    activity are felt more widely than this figuresuggests spending on constructioncreates growth in the wider economy withevery 1 spent on construction generating2.84 of spending more widely.4

    The ect w tke te t ecve the ece

    The construction sector is a bellwether for the economy in the

    UK and has been significantly affected by the recession due to

    the resulting decline in demand from both the public and

    private sectors. Construction output in 2012 was nearly 15%

    below its pre-crisis peak in 2007.

    During this period construction sector output fell most strongly

    in private industrial activity (down 44.7%), private housing (down

    34.5%) and private commercial activity (down 31.0%). Repair

    and maintenance activity also fell by 9.6%. The only elementsof activity which saw growth over the same time period were

    infrastructure (up 51.2%), public housing (up 19.3%), and other

    public construction activity (up 19.3%).5 The categories of

    construction which saw the biggest decline represented over

    half of construction sector output in 2012 as shown in Exhibit 1.

    Exhibit : Construction sector output in by sub-category

    Source: Office National Statistics (ONS), Cebr Analysis

    Repair andmaintenance.%

    Private commercial.%

    Private industrial.%

    Public (excludinginfrastructure andhousing).%

    Infrastructure.%

    Private housing.%

    Public housing.%

    The UK construction sector is at the heart of economic growth

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    To support our submission the CBI commissioned independent

    research on the future of the construction sector from the Centre

    of Economic & Business Research (CEBR). Whilst confidence

    is returning to some parts of the construction sector, CEBR

    forecasting suggests that increases in construction output will be

    slow for much of the next decade without targeted interventions.

    Indeed, Exhibit 2 indicates that growth in the construction

    industry may reflect modest but steady improvements in the

    economy over the coming years, averaging 1.3% between 2014

    and 2017. However, the data also shows that construction output

    may not surpass 2007 levels until 2023 and construction sector

    employment may not rise above 2007 levels until 2024 (2.3m).

    The CEBRs analysis is broadly comparable with other forecasts.

    The Construction Products Association (CPA) has forecast that

    the pre-crisis peak will not be reached until 2021, while the

    Construction Skills Network does not expect the peak to be

    reached until 2022.6 However, any forecasting, particularly on

    a long timescale, is only indicative in nature.

    Source: ONS, Cebr Analysis

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    Exhibit : Annual growth & forecasts in construction output, %

    bt w be we pced t deve gwthConstruction companies are more optimistic about the future

    of the sector given the current level of interest from government.Business leaders in the sector have been unanimous in their view

    that there is far greater potential for growth and job creation with

    targeted action and commitment from government to build and

    renew our national infrastructure. Construction historically

    rebounds strongly after a downturn as Exhibit 3 shows.

    Exhibit :Comparisons of GVA (UK) and construction output (GB), %

    Source: ONS, CBI analysis

    GVA Construction work

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    In addition, the CEBR analysis indicates we are starting from

    a strong base. Exhibit 4 looks at international comparisons for

    construction output and GDP. Compared with the US and the

    Eurozone as a whole, construction makes up a larger share of

    GDP in the UK. Although construction output fell sharply in the

    UK between 2007 and 2012, the decline in output seen was

    smaller than in the US and the Eurozone.

    Exhibit : Change in construction output and GDP - , %

    - - - - - - -

    Eastern and Central Europe

    Germany

    France

    United Kingdom

    United States

    Eurozone

    Italy

    Spain

    Source: ONS, Eurostat, US Bureau of Economic Analysis, Cebr analysis

    % change in construction output -% change in total GDP -

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    d pd cee the eve vee tdeUK construction companies have a strong global reputation with

    major international engineering, architecture and consultancycompanies topping the rankings of world league tables. Indeed,

    the value of construction services exports has seen rapid growth

    in recent years; between 2001 and 2011 the value of construction

    exports rose from 0.2 billion to 1.7 billion.

    The CEBR analysis suggests overseas trade will continue to be an

    important area of growth for the sector but we need to maintain

    our competitive edge. The Olympics helped to show the world our

    construction sector at its best and created a strong platform to

    increase exports in construction services. Exhibit 5 shows that

    CEBR forecasts suggest that export activity in construction

    services could increase to 4.4 billion by 2025.

    Exhibit : Construction sector UK exports and forecasts ofconstruction services, billions

    Source: ONS, Cebr Analysis

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    Opportunities for domestic and international growth are likely

    to create even greater segmentation and fragmentation in the

    industry over the coming years. By 2025 it is likely that small and

    medium sized domestic companies will be operating alongside

    a more limited number of international companies.

    The UK will need to maintain its competitive edge in key growth

    areas. For example, the UK is now recognised as a global leader

    in the exploitation of Building Information Management (BIM)

    technology and processes. But other countries are not far behind

    and we will need to continue to evolve in the adaption of BIM.

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    Construction is an economic enginethat meets and stokes demand fromkey industrial sectors and markets athome and overseas. Demand in the nextdecade shows how the sector is a criticaleconomic enabler as the UK respondsto global trends.

    Gb ted w hpe the be evet 2025

    The 2011 CBI r