Wednesday 5th January
Construction market update
Neon Mavromatis, Managing Director Construction, reflects on the outlook for construction firms and their construction insurance needs heading into 2022.
As data from The Office of National Statistics* shows, 2021 has been a turbulent year for the construction industry, with output falling 1.8% during October 2021. However, there are positive signs that the market has demonstrated its resilience, with construction industry intelligence provider Glenigan** stating that project starts will be 11 per cent higher than 2020’s cumulative figure of £48.7bn.
2022 Growth areas
Glenigan** noted that although COVID-19 has had a significant impact on the UK construction sector, the industry has adapted to the numerous challenges presented by post-Brexit supply chain issues, labour shortages and the impact of the pandemic; and anticipates a steadier progressive strengthening in project starts over 2022/23. They predict the recovery will be driven by strong growth in health and industrial projects, and increases in private and social residential activity. Some regions and sectors will perform better than others. The Midlands and the North of England are expected to see the strongest growth, as the government’s ‘levelling-up’ agenda promotes new development activity. Wales, Scotland and Northern Ireland are forecast to outpace overall UK growth.
Supply chain improvement
November data from the Construction Purchasing Managers Index for November 2021 (IHS Markit CIPS)*** shows growth to 55.5 in November 2021, from 54.6 in the previous month – the highest rise in commercial work since July. The index measuring overall supplier performance reached its highest level since April but remains low off the back of port delays and a severe lack of transport availability due to haulage driver shortages. These are encouraging signs, but business confidence remains at its weakest for four months.
Mavromatis comments: “One of the real positives to come from 2021 is how the construction industry has become more agile than ever before, proving that it can adapt quickly to changing circumstances and benefit from new opportunities. We continue to work closely with our clients as their businesses evolve, to manage their changing insurance needs by providing project specific cover, performance bonds and professional indemnity insurance.”
This view about the sector’s agility is very much shared by Glenigan: “The pattern of UK construction activity is changing post-pandemic. As construction workloads are rebuilt over the next two years, the best-performing sectors will vary from those prior to the outbreak. The types of opportunities are also likely to evolve […] Firms will need to target these new emerging opportunities, ensuring that they have the expertise and resources to increase their exposure to growing markets.”
*’Construction output in Great Britain: October 2021′ – https://www.ons.gov.uk/
**Underlying projects are those with a construction value of less than £100m and omit high-value, major projects that would otherwise skew investment trends. https://www.constructionnews.co.uk/data/recovery-in-new-project-values-will-take-until-2023-16-11-2021/
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Categories: Construction,
