2013-09-16 09:05:14 - Recently published research from Business Monitor International, "United Kingdom Infrastructure Report Q4 2013", is now available at Fast Market Research
Even though there is an increasingly positive short-term outlook for the residential and nonresidential sector, growth in the infrastructure segment is going to be the outperformer within the UK construction industry in 2013. We forecast that infrastructure (which accounts for nearly 20% of total construction industry value) will register industry value real growth of 5.2% in 2013, a stark contrast to the 0.9% contraction we expect to see from the residential and non-residential construction segment, which accounts for 80% of total construction sector industry value.
The upwards revision in the residential and non-residential sector is attributable to a growth in demand caused by government schemes and an improving picture in the wider UK economy. Our latest forecast sees the UK's construction
sector returning to growth in 2013, a year earlier than previously thought. Real growth will be weak, at just 0.2% year-on-year, although will remain positive throughout our forecast period up to 2022, averaging 1.2%.
Full Report Details at
- www.fastmr.com/prod/684663_united_kingdom_infrastructure_report_ ..
Major developments in the sector:
* We upwardly revised our forecasts for the residential and non-residential sector at the beginning of July 2013, which has subsequently played out. Homebuilders are reporting increased profits as demand has been boosted by the introduction of the Help to Buy Scheme. However, we emphasise the risks of the policy, especially the mortgage guarantee scheme, which is due to be implemented January 2014; this could create a false buoyancy in the market, crashing back to earth once the scheme comes to the end. Commercial and industrial construction also have shown some signs of revival, which, in light of positive economic data for the wider UK economy, looks set to continue over this quarter.
* Growth in the infrastructure sector will be less impressive than it should be, in light of the failure of the National Infrastructure Plan to produce new projects. That said, the government has increased the pipeline of construction projects, published following the government's spending review in June 2013. There will be projects worth GBP30.1bn between 2013 and 2015. The previous pipeline updates in November 2012 had comprised GBP19.2bn-worth of projects for that period. The pipeline was not updated in May 2013. Overall, the latest update showed 1,047 projects worth GDP109.2bn from 2013/14 to beyond 2020.
* Spending plans includes GBP5.8bn on housing, GBP4.9bn on education projects. In line with our view that infrastructure will outperform over our forecast period, by far the largest sector in terms of budgetary allocation is transport, which will see GBP61.9bn of investment.
* The announcement by Heathrow Airport in February that it will invest GBP3bn (US$5bn) through to 2019 has encouraged us to upgrade our outlook for the UK's airport infrastructure industry value real growth. We had seen industry growth slowing sharply from 2015, when previously planned projects at the UK's airports were expected to draw to a close. The announcement of investment beyond this period has led us to revise this outlook. There is further upside potential over the longer term, once a decision is made on the various capacity expansion proposals for the south-east of England. The Davies Commission will present its decision in 2015, after the next general election.
* In January 2013, Network Rail (NR) released its initial investment plan for the Control Period 5 (CP5), a five-year period covering April 1 2014 - March 31 2019. The plan has a total budget of GBP37.5bn over the period - including GBP4bn to be spent annually on upgrading railway infrastructure - and reinforces our outlook for strong growth in railways infrastructure industry value. The details of the CP5 investment programme are limited to project specifics rather than details on funding or contracts, but NR stressed the target of reducing the public subsidy over the CP5 period, and reducing costs by a further 18% to reduce upside pressure on ticket prices. London''s transport network will continue to support our growth outlook, with the extension of the Northern Line, Crossrail and the upgrade of Bank station all priced into our forecasts.
* The Hinkley Point C nuclear power station has gained European and planning approval, but is still not guaranteed in light of continued wrangling over the price of electricity the plant will produce between the government and EDF Energy. Centrica pulled out of the project in light of the rising cost, which was approaching GBP1bn for the planning stage alone. EDF have stated they expect a decision to be reached by the end of 2013, over a year after the original date. The renewable sector, particularly in Scotland, continues to perform well with a number of large new wind farms gaining approval over the quarter.
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