Procurement Guidance Tool

A tool to assist procurers in the construction pipeline to implement the Balanced Scorecard Approach developed by government.

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Construction Output 2025

The graph shows the results of the model: the historical series of construction output 1996-2012 (red) and the forecast series 2013-2025 (blue). The green lines around the forecast values show the 95% confidence interval. Since small fluctuations tend to occur randomly (like the ones seen 1996-2012), the green interval shows the area in which 95% of these deviations from trend will occur. Of course, major unexpected shocks like the financial crisis, cannot be integrated i.e. the other 5% of cases.

The model shows an eventual recovery taking place; however, the time it will take for pre-crisis output to return is likely to be significantly longer than many would like. Between 2013 and 2025 construction is only estimated to grow at an average of 1.8% per annum. And, based on the model, the likely driving factor of construction growth will be a recovery in GDP growth, which remains uncomfortably uncertain going forward.

There was short-lived recovery in 2010, peaking in the third quarter; if this is taken as the last peak then output is set to return to peak in 2020 Q2. Unfortunately, due to the temporary nature of this ‘recovery’ it should probably be overlooked and the pre-crisis peak in 2008 Q1 should be taken as the reference point. Compared to this point, the model suggests that output will not return to this height until 2023 Q2.

That’s right; unfortunately, the sector is likely to take 15 years (or another 10 years) to return to 2008 levels of output. However, by 2025 construction output will be more than 25% higher than the 2008 peak and should have topped £30 billion per quarter. This being said, should the industry be looking for another 2008 style peak? Or, should the industry be concerned with smoothing the transit to a long term sustainable level of output?

By Kallum Pickering at 9 May 2013, 16:38 PM


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