(last updated July 2019)
What has been happening in the construction industry?
The construction industry generally enjoyed plentiful demand for its services between the late 1990s and the mid 2000s. There were some problems - skilled labour was hard to find and insurance costs rocketed for some - but a strong housing market and a growing economy meant there was generally plenty of work to go around.
Unfortunately things came unstuck during the late 2000s as the economy nose-dived and the housing market more or less collapsed. Many construction businesses were forced to lay off staff and it became a struggle for some to find enough new work. Conditions remained pretty difficult for many during the early 2010s, but 2013 saw things start to improve.
The economic recovery continued strongly throughout 2014 and into the first half of 2015 because of wages going up, low interest rates, falling oil prices and people's confidence in their employment prospects. However the recovery slowed towards the end of 2015 and slowed further into 2016. Growth in the construction industry was subdued during 2016 and 2017. Little change is expected for 2018 - the Construction Products Association forecast that the sector would remain flat, at best, during 2018. New private industrial orders have been falling and growth has been dependent on an increase in infrastructure activity and private housebuilding offsetting a sharp fall in the commercial and industrial sectors. This pattern is expected to continue in 2018 and 2019.
The loss of jobs in the industry following the financial crisis led to a skills shortage. Around 300,000 skilled craftsmen left the industry, many for good. This led to higher potential earnings for construction industry workers. The skills shortage has continued to cause problems and is expected to worsen as a result of Brexit. Carpenters and joiners, bricklayers, scaffolders, plumbers and electricians are in greatest demand, with an inevitable increase in wages for these trades. Increased wages, the increased cost of imported materials (which building firms rely on heavily) due to the fall in the value of the pound following the Brexit vote and inflation generally mean that margins, which were already under pressure in 2016, were squeezed further in 2017. Higher costs, weaker demand and the uncertainty resulting from the Brexit negotiations made for tough trading conditions throughout 2017 and into 2018. Other constraints on growth are financial constraints, planning and regulations.
Even during the recession and the economic uncertainty following the Brexit vote, the construction industry benefited from:
- many homeowners extending their homes because of the cost of moving up to a larger property, particularly in areas where prices are high, for example in London
- the increase in buy-to-let landlords creating a spike in demand for renovations - although recent tax changes have made buy-to-let less attractive so there may be a reduction in this work in future
The market remains competitive and it's still very important for builders to run their businesses professionally and efficiently - and to offer customers excellent service and value for money.
Quality and standards
Some construction businesses are no more than a 'man in a van', sometimes with little or no training and experience. 'Cowboys' often pay no tax or VAT and sometimes claim unemployment benefit too, enabling them to undercut legitimate businesses on price. Although people have become wiser about avoiding the worst cowboys, unfortunately the construction industry is still plagued by 'house of horrors' stories of poor workmanship and dishonest builders.
For its part, the construction industry has made considerable efforts in recent years to clean up its image and drive the cowboys out of business. Strong emphasis has been placed on education, both of the consumer and of people who choose to enter the building trades. Several schemes, some of them (such as the TrustMark initiative) government backed, have also been introduced with the aim of certifying bona fide tradesmen. However, participation in these schemes is purely voluntary and some members of the industry complain that the cowboys just ignore them or, worse, falsely claim to be members.
Some local authorities participate in the LABC Building Excellence Awards and make awards to local building firms for high quality work in various different categories. A growing number also participate in the Buy with Confidence - Trading Standards Approved scheme.
Environmental matters and sustainability
The last decade or so has seen growing concern about the environment, climate change and energy efficiency. Building regulations have been updated to require things like effective insulation, while more and more householders and businesses have adopted energy saving and renewable technologies. Building techniques have also been affected, with 'sustainable construction' becoming increasingly important. More and more designers and architects are adopting quite a radical new approach to building and requiring new structures to be 'zero carbon' in terms of energy use and emissions. A government policy to implement by 2016 a zero carbon standard for new homes, together with tighter energy efficiency standards to support it, was scrapped in 2015. The aim of the policy had been to ensure that builders of new houses would be required to reduce carbon emissions from fixed heating and lighting, hot water and other fixed building services like ventilation.
The early 2010s also saw the introduction of the Green Deal scheme, under which funding was made available to home owners and tenants for qualifying energy-saving installations. Green Deal work, which included the installation of fan-assisted replacement storage heaters, air-source heat pumps and low-energy lighting among other products, had to be done by an authorised installer. In July 2015 the government stopped funding the Green Deal Finance Company, which was set up to lend money to Green Deal providers, effectively bringing an end to the scheme.
Building materials
Building materials and systems are constantly being refined and improved, with new products coming onto the market all the time. It's important to stay up to date with the latest developments in materials technology to make sure you're always using the best and most cost-effective materials for the job.
The last few years have seen materials prices increase significantly, and it seems fairly certain that coming years will see further price rises.
Keeping up to date with developments
A good way to keep up to date with developments in the construction industry is to join a trade association such as the Federation of Master Builders (FMB). There are a number of different organisations, some of which specialise in a particular area of the construction industry. Try talking to other members of your trade to find out which, if any, they recommend.
The trade press is also a good way of keeping in touch with your industry. Again, there are several titles to choose from, some of which cover a particular aspect of the industry. Master Builder is the official magazine of the FMB, while other titles available for the building trade include Professional Builder and Construction News.
Trade shows and exhibitions are another good means of finding out about the latest developments in building materials, equipment and techniques. A good builders' merchant may also help to keep you up to date.
