Major infrastructure projects to drive sector growth by 2022
HS2, Tideway, the Stonehenge Tunnel and Hinckley Point C are some of the major infrastructure projects projected to drive the construction sector back to pre-Covid growth levels by 2022. That's the conclusion of Glenigan's 2021-2023 Construction Industry Forecast. This chimes with the findings of the Growth Opportunities in the Global Construction Industry report that spoke of lucrative opportunities in infrastructure. The global construction industry is expected to be worth $10.5 trillion by 2023.
Glenigan's forecast puts construction levels at pre-Covid outputs by 2022, and predicts underlying starts will exceed 2019 levels by 3%. The report says there's particular reason to be optimistic in the infrastructure and civil engineering sectors, giving a broad picture and fast-paced predictions of performance across the next two years.
Although the pandemic has caused widespread disruption, there are encouraging signs that the UK construction sector is climbing back to pre-Covid levels. Significantly, the value of underlying starts to May 2021 rose by 20%, that's 70% higher than at the comparable period during lockdown in 2020. Gelnigan has removed projects over £100m to give a clearer overall picture.
This sharp upturn is expected to be followed by a progressive strengthening over the predicted period. The uneven spread of the recovery reflects a wider rebalancing in the UK economy.
Civil engineering investment
The civil engineering sector grew sharply in 2019, with underlying on-site work - minus £100m projects - increasing 27% over the previous year. After starting 2020 strongly, the sector has suffered the impact of the pandemic with underlying starts falling 15%.
The overall picture is a positive one, with the government ploughing record levels of investment into infrastructure. £100bn in capital spending has already been announced for 2022 and significant infrastructure projects like HS2 and Thames Tideway are expected to be important drivers for activity in the sector over the forecast period with the value of contract awards steadily rising in recent months.
As investment programmes see increasing activity, project starts will strengthen by 21% on 2020, stabilising in 2023 at +7%. According to Glenigan economic director Allan Wilen, there are definite reasons for the civil engineering sector to be cheerful. The current forecast is seen as a good indication that the construction industry as a whole is on the way back to pre-pandemic levels.
Wilen also highlighted the challenges ahead for the construction industry, including the current shortage of construction materials. This, he said, highlighted the potential impact on the pace of recovery over the next two years of supply side constraints. Successful contractors will need to mitigate external risks, adapt to digital transformation and sustainability and secure their supply chains as construction enters a highly competitive, yet equally exciting, period.
In fact, Glenigan predicts that the more agile Civils and Infrastructure contractors with a strong track record will be ideally placed to deal with the evolving post-Covid landscape. With opportunities like HS2 Phase 1 and the second Road Investment Strategy (RIS2) coming online, the future looks increasingly positive for the sector.