Last updated: 25.04.18

Sector insights 2018 construction

The construction sector has been experiencing ups and downs in recent years, making it vital that businesses do all they can to prepare for the challenges while taking advantage of the opportunities.

Businesses in the construction sector have become accustomed to challenging conditions in recent years, with economic and political upheaval resulting in considerable turbulence for the industry.

Since the turn of the century, construction firms have had to adjust several times as a prosperous period was followed by a major downturn, such as the global economic crisis in 2008. The subsequent recovery has since been thrown into doubt by ongoing uncertainty relating to Brexit.

A few months into 2018, it seems clear that many of these underlying uncertainties are not going away any time soon – yet at the same time, considerable opportunities for success and growth continue to present themselves for forward-looking construction firms that are prepared to make the most of the available opportunities.

A stabilisation after recent turbulence

2017 was a difficult year for many construction companies, with building activity remaining depressed in many parts of the country as the sector wrestled with the potential consequences of the UK's decision to leave the European Union.

Fast-forward to 2018, and the long-term Brexit outlook remains relatively unclear, but many of the market jitters that followed in the immediate aftermath of the 2016 referendum result have abated somewhat. This contributed to a rise in residential construction and a return to growth for the sector in the second half of 2017, and the signs so far this year have indicated that this trend of stabilisation is likely to continue.

A forecast from Glenigan has indicated that the construction market is expected to dip by only one per cent in 2018 – compared to five per cent last year – with the education, hotel and leisure, and industrial sectors all expected to be standout performers. Building companies that get ahead of these trends could therefore see significant success this year.

Growing investment beyond London

Another recent trend that is likely to continue gathering pace in 2018 is the shift in the focus of property investors from London and the south-east to other parts of the country.

The logic for this isn't difficult to understand – with land and property prices in the capital remaining high despite the recent industry downturn, savvy companies are looking to invest in more affordable regions that offer better prospects for growth and expansion. With significant transport infrastructure developments planned in many parts of the country, businesses are looking beyond London for the greatest return on their investment.

Glenigan's report has predicted that the Midlands, the northern England and Scotland will be the strongest performing regions in terms of project starts this year, suggesting that the future of the construction sector may no longer be as London-centric as it has been in the past.

Training comes to the fore as skills shortage persists

One of the biggest issues affecting businesses from all sectors in recent years has been a persistent and growing skills shortage, with the construction industry proving to be no exception to this. A report from the Royal Institute of Chartered Surveyors has indicated that surveyors, bricklayers and other construction workers are all in short supply at the moment, meaning a lack of access to talent is now considered to be the second biggest problem facing the industry.

As such, 2018 is likely to see a significant rise in investment in learning and development among construction sector businesses, as bosses look to upskill and develop their current employees in response to knowledge gaps, rather than trying and failing to compete for new hires. A rise in interest in apprenticeships is also expected – aligning with recent government efforts to encourage this – as companies realise that a robust training programme can provide a knowledgeable, capable and loyal workforce without the difficulties associated with external recruitment.

Technology shakes up the sector as businesses prepare for GDPR

The construction industry has long been at the forefront of technological innovation, with companies eagerly embracing new devices and systems that can improve their operational efficiency.

In 2018, it's likely that modular building and 3D printing will take further steps towards the mainstream, providing builders with advanced new ways of designing and manufacturing structures, while virtual and augmented reality tech will make it easier than ever to plan and visualise designs. The use of smart technologies, sensors and eco-friendly materials in construction projects is also set to become more widespread.

However, construction firms shouldn't forget that these new capabilities come with their own set of additional responsibilities. Data protection and cyber security will be as important for the construction sector as for any other industry in 2018, especially with the new European General Data Protection Regulation (GDPR) coming into effect on May 25th. Ushering in stringent new consent rules on personal data use and harsh penalties for non-compliance, GDPR should be considered a business-critical issue for all organisations, and it's vital to ensure that all staff have been briefed on how it will affect them.

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